Depending on the amount borrowed for your mortgage loan and many other factors, like the interest rate and the loan repayment term, monthly mortgage payments can be as high as several thousand dollars and is most likely your largest monthly bill. Reducing your mortgage will make payments smaller, saving you money and making your life easier. Whether your monthly mortgage payment is very high or not, saving money is something that benefits everyone, especially those who are going through financial issues. Fortunately, there are some tips and tricks for reducing your mortgage that every home owner should know about.
Tips and Tricks
- Refinance your home. Taking out a new loan, with different terms, to pay for your mortgage could be the best way to save money and reduce your mortgage. Refinancing into a lower interest rate loan will drastically reduce your monthly payment and make your mortgage easier to pay. However, the mortgage refinancing process can be fairly expensive, so you should take all costs into account if you decide to take this route. Also, because you will mostly be paying interest towards the beginning of the loan, it’s important to refinance as soon as possible and obtain a lower interest rate, saving more than if you refinanced later into the repayment period when you won’t be paying so much interest on the loan.
- Cancel private mortgage insurance. If you couldn’t afford to make the 20 percent down payment, then you are probably paying for mortgage insurance, as this is required for those who can’t make the minimum down payment. Private mortgage insurance can mean thousands of dollars monthly. If you have repaid enough of the loan to gain at least 20 percent equity in your home, then you can contact your lender and discuss cancelling your private mortgage insurance. Your lender will have your home appraised to determine its value, and cancel your private mortgage insurance. Lenders don’t drop the insurance on their own, so you will have to contact them about this when the time comes.
- Shorten the term of your mortgage loan. While shortening the loan term won’t make your monthly mortgage payments smaller but will actually increase them, it will significantly lower the overall cost of the loan. Paying off your mortgage loan quicker means you will be paying less in interest, which can save you thousands of dollars. If you come to the conclusion that you can afford to make larger monthly payments toward your mortgage loan, then shortening the length of your loan is a sure way of reducing your mortgage.
- Extend the term of your mortgage loan. If monthly payments start to become a burden, then a way of reducing them is if you extend the length of your loan, for example from a 15-year to a 30-year mortgage. However, this means that you will be paying significantly more in interest, which will increase the overall loan value. You will still be able to make extra payments on your loan, which will pay it off quicker, and your monthly payments will be much lower.
- Make extra payments on your loan. While this doesn’t sound like something that will help you reduce your mortgage, making extra mortgage payments will help you pay off the loan quicker and save thousands in interest costs. Of course, if you can make regular extra payments, you should just reduce the term of your loan and pay the higher monthly payments. But making a few extra payments now and then will still be of great help in reducing the cost of your loan, and diminish its term.
Being able to reduce your mortgage depends mainly on your financial situation and budget. Take some time to carefully evaluate your monthly expenses and decide if you can make some changes to your mortgage in order to help you save money.