It sucks to be in debt. And it really sucks to have a big chunk of your paycheck be taken out each month just so you have a place to live.
Are there ways to save money while continuing to pay your mortgage on time?
Here are FIVE helpful tips for saving more money each month on your mortgage payments.
Refinance to a Lower Rate?
Take advantage of lower interest rates!
You will need exceptional home equity to qualify for a refinance and will need to meet other requirements, as well. Equity is the market value of your home less that of what you owe on the mortgage.
Refinancing is worth it if you can lower your rate by one percentage point. However, you may be able to lower your monthly payment with a 0.5-0.75 point decrease; that depends on how much the refinance is going to cost and at what point you’ll reach the break even point on said costs.
Refinance to a Longer Term?
Receiving more time to repay is another great option for refinancing. If you have made payments on a 30-year loan for a couple years, you could refinance the remainder out for 30 years. Ultimately, this will likely result in a lower monthly payment.
Unfortunately, this would mean that you will pile on more interest charges, especially for month to month payments, if you’ve been paying them for a significant amount of time. It’s best to weigh out the good and bad of this option o be sure it’s the best way for you to lower your monthly mortgage payments.
Apply for Mortgage Forbearance?
If you’ve experience an unexpected short-term financial setback and are afraid you won’t be able to make your monthly payments, a forbearance agreement can provide temporary relief.
A forbearance agreement is going to temporarily lower your mortgage payment while in the midst of a financial hardship. Your lender can agree to suspend or lower your mortgage payments for a set amount of time. The downside, once this agreement is lifted and no longer in place, not only will the mortgage payments resume as normal, but you may also have to make up the missed amounts in whichever way is possible. It’s always a good idea to make contact with your lender prior to missing a payment, not after!
Apply for a Loan Modification?
If you’re going through a financial hardship and your payment is no longer affordable, this option may be the best for you. Your lender will restructure your loan in some type of way to lower your monthly mortgage payment.
In order to request a loan modification from your lender, you don’t have to be behind on mortgage payments… it’s a good idea to reach out to your lender about this potential loan option in advance.
Eliminate Mortgage Insurance?
All FHA loans and some conventional loans come with added costs… Dun, dun, dun! This is Mortgage Insurance. Being able to take this out will result in a lower payment each month.
To get rid of your FHA Mortgage Insurance, you may need to refinance and transfer into a conventional loan.