Reduce your mortgage payment without refinancing
Not everyone wants to refinance
Mortgage payments are the largest recurring monthly expense in many US households, which is one reason the country is experiencing a mini-boom in refinancing.
Current mortgage rates remain stubbornly low and homeowners are exercising their right to a .
However, the ability to refinance will not be available to everyone. You may be recently self-employed or working through a tax lien, for example.
The good news is that even without refinancing, there are ways to save money on your mortgage.
You can make changes to your payment
The term of a mortgage is generally capped at 30 years. Throughout these years, the amount of interest you pay increases (and can become quite significant).
AT a 30-year fixed-rate conventional loan at the of $ would require approximately three hundred thousand dollars in interest payments to repay the loan.
That’s a lot of interest to pay.
These three methods below will not reduce your payment todaybut they will allow you to achieve significant long-term savings by reducing the principal balance of your loan.
The smaller your balance, the less interest you will pay to the bank.
At any time of the year, you have the right to “prepay” your mortgage. You accomplish this by making a second separate payment to your lender in addition to your regular payment.
At today’s rates, making just one additional payment per year will reduce the term of your loan by approximately 4 years.
Multiply 4 years of payments by your monthly principal + interest due and you’ll get an idea of how much money an extra payment per year can save you.
“Round up” your mortgage payment each month
Each month when your mortgage payment is due, “round up” to the nearest hundred dollars. If your payment is $1,450, send fifty dollars more to your lender.
When your payment is received, your lender will apply the additional monies paid to your main balance, reducing what you owe. This shortens the total term of your loan and, again, saves you money.
Rounding up won’t have the same effect as making an extra payment every year, but you’ll significantly reduce your costs in the long run.
Rounding up can shorten your loan term by two or more years, depending on the size of your loan and how many years are left in your term.
Enter a bi-weekly mortgage payment plan
Many lenders offer a bi-weekly mortgage payment plan where you can make payments on your loan every two weeks instead of once a month.
There are 52 weeks in the year, which equals 26 “half payments” made, which equals 13 “full payments” made, making bi-weekly programs similar to one extra payment per year.
Are bi-weekly mortgage programs offered by your lender worth it? .
Make changes to your loan structure
Changing your mortgage payment saves you money in the long run, but what about when you need relief today?
Here are some methods that can help you.
Contact your lender to cancel your mortgage loan insurance
If you used a at the time of purchase, or used a conventional loan with less than 20% down payment, you are likely to pay private mortgage insurance (PMI).
However, the PMI is not forever, especially because home values are on the rise.
Rising home values reduce a home’s loan-to-value (LTV) ratio and can put you in a position to cancel your PMI right now.
The first step is to contact your current lender and request that your PMI be removed. Your lender will grant or deny this request.
If the request is denied and you want to continue, you have three options:
- Reduce your LTV to 78% with a lump sum payment. Your PMI will cancel itself.
- Add value to your home and have the home appraised.
- Ask for a new appraisal of your home. With an LTV of less than 78%, your PMI cancels out.
Note that may require a phone call to your bank. Take notes on each call in case you speak with multiple bank representatives.
Apply for a loan modification
If you can’t pay your monthly mortgage payments and are at risk of falling behind, contact your lender as soon as possible – you may qualify for a loan modification.
Loan modification is the process of changing the terms of your loan without refinancing and lenders often work to help homeowners in need.
The government is incentivizing banks to participate in the modification program, so don’t overlook this option.
Apply for a reduction in your property taxes
According to the National Taxpayers Union, up to 60% of American homes are overvalued, meaning the majority of American homeowners pay too much property tax.
There is a formal process for appealing your home’s valuation. Check with your county government or other local tax authority.
You can reduce your tax bill by 10% or more.
What are today’s mortgage rates?
With low mortgage rates, there are plenty of options for refinancing. And, you can’t know if you’ll be approved until you try to apply.
Get today’s live mortgage rates now. Your social security number isn’t required to get started, and all quotes come with access to your live mortgage credit scores.
The information contained on The Mortgage Reports website is provided for informational purposes only and does not constitute advertising for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent company or affiliates.