Housing takes up nearly one-third of every American’s budget. If mortgage payments are a financial stress, there are some ways to lower housing costs.
This guide explains six ways you can lower monthly payments for a home loan and save money. Let’s get in!
Apply for Loan Modification
If you’re facing a sudden, major financial event, such as losing your job or a medical expense, you may qualify for a loan modification.
Contact your lender or a mortgage broker to see if they can give you a lower interest rate or transfer to another loan product, securing a cheaper deal. With negotiation, you can also get a repayment extension or reduce the principal balance.
If your financial hardship is exacerbated by an adjustable-rate mortgage, the lender might agree to a fixed-rate loan condition. This way, you will pay a predictable monthly payment instead of one that fluctuates every month or with market conditions.
Refinance Your Mortgage
Mortgage refinancing is arguably the most common and effective way to reduce your monthly loan amount. Refinancing is the process of replacing a current loan with a new one to secure a lower interest rate.
Let’s say your credit score has improved since you applied for a mortgage. Now, you can qualify for a loan with more favorable terms. Home loan refinance is exactly that.
With mortgage refinancing, you also have the option to change your loan term. A 25-year mortgage definitely comes with lower payments than a 15-year home loan. Choose a reliable mortgage lender like SoFi to save as much as possible.
Increase the Loan Term
As hinted earlier, increasing the loan term would mean lower monthly payments. When you spread the outstanding balance over a longer period (from 15 to 30 years), your monthly payments will decrease.
Keep in mind that increasing the loan term will increase the total amount of interest paid over the life of the loan.
Increase Repayment Frequency
On the flip side, you can increase the frequency of repayments to pay off the mortgage quickly.
To fast-track repayment, pay fortnightly or weekly rather than monthly. You can also make extra repayments or lump sums. Any amount over the minimum repayment goes straight toward principal.
You might deposit spare cash or draw from your inheritance to pay extra.
Remove Private Mortgage Insurance
Removing Private Mortgage Insurance (PMI) is another excellent way to reduce your monthly payment. PMI is mandatory if you acquired a conventional mortgage and made a down payment of less than 20% when you originally bought the home.
Cancel the Private Mortgage Insurance once you have 20% equity. Making payments on time will also convince your lender to remove this additional expense.
Consider Debt Consolidation
If you have other high-interest debts, such as credit card loans or personal loans, in addition to your mortgage, consider debt consolidation. It is the process of combining existing debts into a single monthly payment. This will help simplify payments and lead to a lower interest rate.
