4 Options for Reducing Your Mortgage Payment
Mortgage Payment
No matter how much you love your home, the idea of a mortgage payment can be pretty intimidating.
The reality is that most mortgages are set up to have monthly payments with very little wiggle room for making adjustments.
If you want to lower your mortgage payment without moving or selling your home, there are four options for a repayment plan that might work for you.
Refinance Your Mortgage to a Lower Rate
If you have a good credit score and enough equity in your home mortgage refinancing solutions, refinancing at a lower rate will result in monthly savings.
However, this option requires that you be able to cover closing costs and the cost of finding another place to live if you move out while your loan is being processed.
Make One Extra Payment Per Year
If your mortgage allows for an annual payment, consider adding an extra $250 or so each month instead of having it automatically withdrawn from your checking account.
This way, at least every other January, you’ll clear up some room on the principal balance where interest charges can accrue less quickly.
Over time this strategy pays off with more money applied towards paying down the amount due each month, which reduces finance charges over time.
Extend Your Amortization Period
If you’re not in a rush to pay off the full amount of what you owe, extending the mortgage term by 15 or even 30 years will lower monthly payments significantly.
This is great for those who anticipate paying less each month than they currently do because their income isn’t sufficient enough to cover expenses plus repayments on their home loan.
With this option, there are no penalties if you decide to refinance with another lender at some point down the road so long as it falls within certain guidelines set forth by Fannie Mae and Freddie Mac.
You can also get out of an adjustable-rate mortgage before its maturity date, which makes this choice especially beneficial for people who think they might not be able to afford their home or need cash shortly.
Use HARP
The Home Affordable Refinance Program allows those experiencing financial difficulty with their current mortgage because of unemployment, underemployment, foreclosures, short sales, and more to refinance into another Fannie Mae loan without having to pay any fees.
Using this option requires that you make three consecutive payments on time as well as meet income requirements.
Keep in mind that your interest rate must be at least one percent higher than what it is now if GSEs approve your application which means there’s still a chance you could end up paying off the same amount every month no matter which way you go.
If you are struggling to pay your mortgage each month, there are solutions. Meet with a financial advisor to decide what option is best for you.
Category: Housing
