Tips on Saving Money on Your Mortgage
Having Mortgage Problems? Here are a few tips help you save some money!
Your mortgage is one of, if not the, biggest expense that you’re responsible for every month. It takes a significant chunk of change to pay for housing costs. There are steps you can take to reduce your monthly payment or pay off the loan faster to give yourself a bit of flexibility in your budget.
1. Make an extra payment
Making just one extra payment each year can save you thousands in interest and take years off the life of your loan. When you get a bonus at work or some unexpected cash, turn around and apply that to your mortgage. It goes directly towards the principle balance and eliminates paying interest on this balance. You might cut two, three, or even five years off your loan by doing this once a year.
2. Pay bi-weekly
A bi-weekly payment plan creates another extra payment during the year, but does it in a way that is spread throughout the year. Take half of your mortgage payment each pay period, or every two weeks, and transfer it to an account that you pay your mortgage from. At the end of the year you’ll have an extra payment for your mortgage in the account that you can apply to your principle. Some companies also allow you to set up the same payment system directly through them instead of being responsible for it yourself.
3. Eliminate PMI
Private mortgage insurance (PMI) is required if you don’t put at least 20 percent down on your purchase. Once you’ve reached the point where 20 percent of the loan is paid off, speak to your lender to cancel the PMI if you’re eligible. This can occur once you pay off 20 percent or if you’ve made improvements to your home that have increased its appraisal value. You’ll probably need to pay for a new appraisal, but this small fee can cut your monthly mortgage payment significantly.
4. Get a new assessment
If you’re not trying to cut your PMI, it could be beneficial to have your property re-appraised if you’re paying taxes on an elevated home appraisal. If your home is worth $220,000 for example, you don’t want to be paying taxes on an assessment of $250,000. Savings vary based on the value of your home and the property tax rate you’re responsible for paying.
5. Recast your mortgage
If you’re trying to cut your monthly payments to ease your finances now instead of trying to cut the term of your mortgage down, you can ask your lender to recast or re-calculate your mortgage payment. Do this after you’ve made one or more extra payments on your principle. They will re-calculate your payment and give you a lower amount to pay each month. This is especially useful if the monthly payment is stretching your wallet a bit more than you can handle.
6. Modify the loan
A loan modification may be possible if you’re experiencing financial difficulties, depending on who your lender is. You may be able to re-negotiate the interest rate or term of the loan to get your payments to an amount that you can manage. You’ll pay more in interest over the life of the loan if you extend the term, but it’s worth it if the difference between a reduction or not is the possibility of losing your home.
7. Coming up with money
Your mortgage can help you come up with some extra money if you have a brief rough patch that you need a bit of assistance with. Going to the title loan locations available, you can find a deal that allows you to use your title to get money fast. There are also companies that buy out title loans if the original balance isn’t re-paid according to the terms originally agreed upon, which eliminates some of the risk associated with the process for the lender. This gives you a better chance of approval and getting the money that you need when you need it without delays. Sometimes there are situations in life where you’re in a bind, and it’s helpful to know the resources that are available to ease the strain.
Your mortgage payment is one of the top priorities in your budget, but it doesn’t need to consume more of your income than you can afford. Take steps to save money on your mortgage and give yourself a bit of room to breathe when it comes to your finances.