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Five Ways To Lower Your Mortgage Payment

Written by Jaymi Naciri on Thursday, 05 March 2015 12:55 pm
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There are two kinds of homebuyers: those for whom the sales price is the main consideration, and those who are mostly concerned with what it will cost them per month. If you've already bought a house, there isn't anything you can do about the sales price. But there may be ways to lower what you shell out monthly.

Want to lower your mortgage payment? Here are a few ways to do it.

Get Rid Of Your Private Mortgage Insurance (PMI)

"PMI is the lender's (bank's) protection in the event that you default on your primary mortgage and no longer make payments and the home ends up going into foreclosure," said Investopedia. "If the borrower is unable to put down 20 percent or more, or does not have the required funds to do so, then lenders will typically look at the loan as a riskier investment for their balance sheet and will require a PMI payment from the borrower."

That means you end up paying a premium above and beyond your principal, interest, and homeowner's insurance—currently about 1.35 percent. On a $200,000 loan, we're talking about $2,350 a year. Remove your PMI, and that's $195 a month in your pocket.

If house prices have been rising in your area, you've been in your home for at least two years, and you think your equity in your home has increased, talk to your lender.

Lower Your PMI

If you can't yet get rid of your PMI, you may be able to lower it.

In January 2015, the government announced lower PMI rates for buyers taking out Federal Housing Administration (FHA) loans.

"This change is expected to save more than two million FHA homeowners about $900 a year and allow about 250,000 consumers to buy their first homes in the next three years, according to a news release from the U.S. Department of Housing and Urban Development," said Credit.com. "Hundreds of dollars in savings makes a big difference in the finances for first-time homebuyers who couldn't afford to make a 20 percent down payment."

New homebuyers can take advantage of the lowered PMI; existing homeowners who want to lower their PMI will need to refinance.

Refinancing

Lowering your PMI is far from the only advantage of refinancing. Taking advantage of low rates means you could save substantial dollars on your mortgage payment.

"Depending on loan size, a rate reduction of as little as a half point can save some real money," said Fox Business.

If you are currently paying on a 15-year mortgage, switching to a 30-year loan can save you hundreds of dollars monthly. Check out this comparison calculator to see your particular scenario.

If you're in an area that is declining and can't refinance by traditional means, check out a HARP refinance. "The Home Affordable Refinance Program (HARP) through the U.S government may be the answer to your financial woes.

According to the HARP fact sheet, if you don't qualify for a conventional refinance, a program through HARP may help lower your mortgage payments through refinancing to a lower rate or a more stable mortgage product," they said

Check out the HARP website for qualification information.

Buy Down Your Rate

If you're just buying a home, your lender may have already talked to you about buying down your rate. If you can swing it, a little more money upfront for a lower interest rate can save you money. Sometimes, your lender might also be able to help you buy down you rate.

"You can typically purchase one discount point for one percent of the cost of your mortgage, with most lenders limiting you to the purchase of three points," according to U.S. Mortgage Calculator. "Each point will reduce your rate by 0.125 to 0.25 percent, for the life of your loan. That can mean some serious savings and a modest reduction in your monthly payment."

Monthly principal and interest on a $300,000 mortgage at a 4.27 percent conventional rate is $1479.34. Buying down the rate by one point to 4.02 percent lowers the payment to and the payment to $1435.70.

Get a Tenant

Have an extra room, preferably one in a private location with its own entry? Take on a roommate or a border and collect some rent.

According to US News, renting is an effective way to solve a cash flow problem. "When people can't afford to buy homes, they rent. More demand means you can get more for your spare room," they said.

To see more advantages, visit US News.

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6 comments

  • Comment Link Serge Friday, 29 May 2015 12:22 pm posted by Serge

    These are good things to consider. Refinancing can be a bit of a chore, but depending on the market, can be very beneficial. It's also true that renting out a space can help a lot. This may not be an option for everyone, but you may be surprised at what you can make work for you. Thanks for the article!
    http://www.guardiansavingsbank.com/mortgageloans.aspx

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  • Comment Link Delores Lyon Tuesday, 26 May 2015 1:37 pm posted by Delores Lyon

    Thanks for sharing this advice on lowering your mortgage rate! It is nice that there are so many ways to lower the payment too! In fact, I think that I might want to refinance my home to save some money, especially if the longer loan payment can help me save money each month. Plus, it is nice that there is a government refinancing program that is there to help people who have trouble with their mortgage! https://www.bankbv.com/mortgage

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  • Comment Link Corey Monday, 16 March 2015 5:17 pm posted by Corey

    How can I find out how much equity I have in my home?

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  • Comment Link Haylengroup Friday, 13 March 2015 6:39 pm posted by Haylengroup

    In my view point, getting a long term loan is a good way to lower the mortgage payment. Instead of lingering under the hefty monthly payments that come with 15 or 20 year mortgages, an extended 30 term mortgage can help minimize monthly payments. There is one demerit though, your interest rate will take a hike. However, you can choose to make additional payments on mortgage, like you were paying for 15-20 year term. With the extra payments, you’ll be able to repay quicker.

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  • Comment Link Jim Esposito Monday, 09 March 2015 11:56 am posted by Jim Esposito

    This is good advice, but as a Real Estate Agent in Fort Lauderdale I always pass on something my father used to preach: don't ever make your mortgage payment, exactly. Always throw in a few extra bucks toward principal. This is especially important early in the amortization schedule, when the biggest percentage of your monthly payment is paying interest. If you throw a few extra bucks in toward principal it can really advance you up the amortization schedule. When we bought our house we had a $250,000 mortgage and our payment was $1,500 a month. The first payment I paid an extra $1,000 toward principal. That saved me $10,000 over the course of the loan. You can read more real estate advice on my website at http://www.fortlauderdalebeachproperty.com

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