Be Part Of Mortgage Forbearance
Aside from applying for a loan modification, another option you may consider is applying for a mortgage forbearance. This is applicable if you are looking for a short-term solution to your problem, which is you dont have enough money to pay your monthly mortgage on time.
If you are experiencing a financial hardship, which you think can last for a couple of weeks or months only, then besides loan modification, you can apply for mortgage forbearance.
When you apply for mortgage forbearance, you and your lender may create an agreement regarding the suspension or lowering of your mortgage payment in just a short period of time. After the forbearance period ends, your monthly payment will be back to normal.
If you are planning to apply for a mortgage forbearance, you need to talk to your lender a few weeks before you miss your monthly mortgage payment.
Appeal Your Property Taxes
If you have an escrow account on your mortgage, then youre probably paying for your property taxes as part of your monthly mortgage payment.
Your property taxes are based on the tax assessment conducted by your county. The assessor determines the value of your home and land after putting it through a deep analysis. If the assessor values your home too highly, youll end up paying more taxes than you really have to.
You can usually find out the assessed value of your property by looking at your tax bill or visiting your local county recording offices website. If you think your home is overvalued, you can protest the assessment. Come prepared with a list of recently sold comparable homes or an appraisal, if you have one. A reduced assessment could mean lower property taxes and a lower monthly mortgage payment.
Ways To Lower Your Mortgage Rate
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Buying a home is the largest purchase most people will make. And if you aren’t aware of the financing options available, it could wind up costing you far more than you’d expect.
Controlling your homeownership costs begins with your mortgage loan and the interest rate attached to that mortgage. The lower you can push your mortgage rate, the less money you’ll pay over the life of the loan.
Here are 10 ways to lower your mortgage rate.
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Should You Refinance Your Mortgage
Understanding the basics will help you make the best decision on whether a refinance makes sense for you, and then move quickly if you decide to refinance. Youll want to not only look at the current interest rates and closing costs, but also think about your personal situation and your financial goals.
For instance, if youre planning to move in a few years, its likely that a refinance wont make sense, since you wont have enough time with the better terms of the new mortgage to offset the closing costs. But if youre staying put in your house for the long haul and can get an interest rate thats significantly lower than your current mortgage , then theres a good chance refinancing will ultimately save you money.
If after using a refinance calculator you find that a refinance makes sense for you, make sure you compare lenders and brokers to find the best mortgage refinance rates, as well as the lowest closing costs. Use an online comparison tool to quickly compare refinance terms across multiple lenders.
Once you decide that refinancing is the best move for you, the process can be quite easy, and youll be on your way to saving money and hitting your personal financial goals. Just dont wait much longer to lock in todays interest rates while theyre still low.
Get A Deal With Daily Interest Calculation
If the interest on your mortgage is calculated annually, you could still be paying interest on the parts of the loan you have paid off for almost a year after you have repaid it. Getting customers to pay interest on loans they have repaid is an outrageous practice and should be stopped but some mortgage lenders still practice it.
With daily interest calculation, every payment of capital you make will almost immediately start to reduce the interest payments you have to make. Over the term of a mortgage, mortgages with daily interest calculation will cost you thousands of pounds less than those with annual interest calculation.
Mortgage lenders are likely to be rather coy about calculating interest on an annual basis, so you will probably have to ask them outright.
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How Does Your Credit Score Affect Refinance Rates
When looking to refinance, youll want to make sure to have a healthy credit score. The lower your credit score, the higher your interest rate and the more youll pay in interest.
For example, a credit score below 700 versus one above 700 could potentially cost you a half of percent. On a $190,000 30-year mortgage, a half of percent could cost you about another $55 per month. Over a 30-year timespan, the difference is quite costly approximately another $20,000.
So if you know youre going to refinance your home in the near future, make sure all your payments on your existing credit obligations are up to date, and be cautious of making any moves that will negatively impact your credit score in the short term, such as taking on a new car loan or applying for new credit cards.
Extend The Length Of Your Mortgage
If you already own a home with a monthly mortgage payment youd like to lower, one strategy is to extend the length of your mortgage term. This is generally done by refinancing your home to pay off the existing mortgage with a brand-new one.
When you refinance, there are two ways to lengthen your mortgage. One is to simply start your mortgage again from the beginning, but another option is to change your loan repayment terms altogether.
Lets say youre currently seven years into a 30-year mortgage. If you refinance whatever principal is left on your current mortgage into a new 30-year mortgage, your monthly payments will drop because youre now spreading out the payments across a new 30-year period and at the same time starting with a lower principal since youve already paid off a portion of the original mortgage.
Or, if you currently have a 15-year mortgage, you could refinance into a new 20-year or 30-year home loan, thus lengthening your loan term and spreading your payments out over a longer timeline.
How much can you lower your payment by extending your home loan? While the specifics will vary depending on your circumstances, a borrower who just started a 15-year mortgage for $250,000 with a fixed APR of 4% would fork over $1,849 per month in principal and interest. If that person switched to a 30-year home loan with the same APR, their payment would drop to $1,194 per month.
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Appeal Your Homes Assessed Value With The County
Property taxes are high the average is 1%. In some states, such as Texas, they are really high, over 2% of the propertys assessed value every year.
If you think youre paying too much property tax and your homes value should be lower than it is, you can appeal the tax assessment with the county.
Get your county tax assessment of your home and verify they have everything listed correctly. Do they have the number of bedrooms and bathrooms, right?
The square footage, how many acres you actually have, are all of these correct? If not, you can contact your local tax assessor and let them know they have incorrect facts listed in their report.
Recap: 9 Ways To Lower Your Monthly Mortgage Payment
To recap, here are 9 ways you can lower your monthly mortgage payment with or without a refinance:
The good news is that, with mortgage rates sticking near historic lows, many homeowners are still eligible to refinance.
I advise that you talk to a qualified mortgage planner or loan officer who can provide you with a mortgage plan that best meets your needs, Laffey recommends.
Keep in mind that lowering your interest rate even a fraction of a percent can generate surprisingly big monthly savings.
So even if youre not sure whether youd qualify, its worth talking to a lender about your options.
Also Check: Are Mortgage Discount Points Worth It
How To Lower Your Monthly Mortgage Payment: Guide
If your mortgage payment is no longer affordable, you can refinance the loan, ask the lender for help, or check out your insurance options.
Edited byChris JenningsUpdated October 12, 2021
Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
If you currently pay a mortgage, you might be looking for ways to save on your monthly bill.
A lower mortgage payment can put some breathing room in your budget and let you focus on other financial goals. There are plenty of options, including refinancing your mortgage, removing private mortgage insurance, applying for forbearance, and more.
Heres a rundown on how to lower your mortgage payment:
Accomplishing Your Other Goals
If you choose to refinance to lower your monthly payments, you may also have the opportunity to make additional changes to your loan at the same time. Depending on your circumstances, you may also be able to switch to a fixed-rate mortgage or borrow from a portion of your available home equity. Talk to your lender about what youd like to accomplish and see whats achievable for your situation.
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Refinance With A Lower Interest Rate
A lower interest rate can mean big savings. For example, on a $200,000 30-year-fixed loan, reducing the interest rate from 5% to 4% can mean a monthly savings of almost $120.
If youre looking to lower your mortgage payment, keep an eye on the market. Look for rates that are lower than your current interest rate. When rates drop, contact your lender to lock your rate so it doesnt go up before your loan closes.
Another way to get a lower rate is to buy down your rate with points. Mortgage discount points are an upfront fee, paid to your lender at closing, to get a lower rate. Each point is 1% of the loan amount. For example, on a $200,000 loan, one point would cost you $2,000 at closing. One point generally results in an interest rate reduction of .25% to .5%.
Whether discount points make sense for you is generally a matter of how long you plan to stay in the home. If you only see yourself in the home for a few more years, its probably less expensive to pay a slightly higher interest rate. However, reducing your rate by half a percent could save you thousands over the course of a 30-year loan.
Get approved to refinance.
Not Everyone Wants To Refinance
Mortgage payments are the largest recurring monthly expense in many U.S. households, which is one of the reasons why the nation is experiencing a mini refinance boom.
Current mortgage rates remain stubbornly low and homeowners are exercising their right to a home loan refinance.
However, the ability to refinance wont be available to everyone. You may be recently self-employed or working through a tax lien, as examples.
The good news is that even without a refinance there are ways to make savings on your mortgage.
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Extend Your Loan Term
Another option is to refinance and extend your term, which is the amount of time you have to pay off your loan. The advantage here is that you will lower your monthly payment and provide additional monthly cash flow.
Lets assume you have a current loan balance of $250,000, at a 3.25% interest rate, with 18 years remaining on your loan. Your current monthly payment is approximately $1,532, says Derks.
By refinancing to a new term of 30 years, still at a 3.25% interest rate, your new monthly payment would be approximately $1,088, providing extra monthly cash flow of about $442.
This strategy can work even if you already have a low interest rate. Just note, you could end up paying more in total interest. But if your main goal is a lower monthly mortgage payment, that might not matter.
Can I Lower My Interest Rate Without Refinancing
When mortgage rates drop, homeowners often wonder if they will be able to take advantage of lower rates. In general, lenders require borrowers to refinance into a new home loan in order to change their mortgage rate, requiring the borrower to requalify, the house to pass an appraisal and the homeowner to again pay closing costs. However, there can be another way to lower your mortgage rate without refinancing: a loan modification.
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Shop For A Cheaper Homeowners Insurance Policy
Homeowners insurance is typically collected monthly and put into an escrow account. Just like when you get a mortgage, you need to shop around for the best rates with your homeowners insurance.
Find out what youre paying now and shop around for a cheaper policy to help reduce your payment. Quote Wizard is a website that allows you to get quotes from several insurance companies in minutes.
Overlooked Tips To Lower Your Mortgage Payment
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As a homeowner, chances are your mortgage payment is by far the largest bill you have to pay each month.
For some, this bill can mean the difference between living a comfortable life and living paycheck to paycheck.
Regardless of where you fall, if you lower your mortgage payment you can save more money every month or start saving money in the first place.
But what are the best ways to lower your mortgage payment? Is this even possible?
The answer is yes. You can lower your mortgage payment with a little bit of effort on your part.
And in this post, I am going to share with you 10 overlooked tips to reduce your mortgage payment.
You can choose one of these tips or combine a few to make a huge reduction in the cost of your mortgage.
Lets get started so you can saving money today!
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Use A Streamline Refinance
A fourth choice is to consider a Streamline Refinance, available on many FHA, VA, and USDA home loans.
With a Streamline Refinance, the lender is not obligated to re-check your income, credit, or employment. That means the loan can close much more quickly and possibly avoid a lot of paperwork.
Whats more, with a Streamline refi, you can skip the home appraisal. That means you can refinance with little to no home equity accrued and you may lock in a lower rate than you would with other types of low refinancing.
With a Streamline Refinance, the lender is usually not allowed to add closing costs to the loan balance, and the interest rate and monthly payment must be lowered enough to make it worthwhile for the borrower, adds Derks.
Essentially, a Streamline refi allows the borrower to obtain a lower rate and payment for very little cost and very little effort, she explains.
How To Use A Refinance Calculator
There are many free refinance calculators readily available online which can help you determine if refinancing will save you money. With a refinance calculator, you can enter your current mortgage terms, the new proposed mortgage terms and any fees for refinancing. You can try this refinance calculator at LendingTree to see how it works.
A refinance calculator will help you figure out how much money youll save on a monthly basis and over the life of your loan, and whether its worth the costs of acquiring a new mortgage.
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Go With An Arm And Hope For The Best
If you want a self-service mortgage, you could also just go with an adjustable-rate mortgage, which will rise and fall over time as the economy does its thing.
While this might sound silly, tons of homeowners who took out ARMs prior to the recent housing crisis actually wound up with rock-bottom interest rates without lifting a finger.
They actually benefited tremendously as mortgage indexes hit all-time lows, assuming they kept their homes and their original mortgages.
Of course, this isnt for the faint of heart, and the way things are looking at the moment, interest rates seem unlikely to go much lower.
Still, this is one way to potentially lower your interest rate without refinancing. Or doing anything at all.