Just about everyone would love to reduce their monthly mortgage payments. There are several ways to accomplish this, and one of them is likely right for you.
You can substantially lower your monthly mortgage payment by refinancing at a lower interest rate. If interest rates have dropped since your mortgage was issued, call your current lender to see what rates they are offering. Your lender will likely be eager to work with you, if only to keep your business. And staying with your current lender can have advantages for you, too: Because your lender already has your basic information, you may be able to save on paperwork and on some fees. Should You Refinance Your Mortgage Loan?
You will still have to pay some closing costs, so make sure that your new interest rate is low enough that you will derive some real savings. Look for at least a full point drop or more in the interest rate, and do the math factoring in the closing costs.
If you are experiencing temporary financial troubles, you can refinance from a shorter-term mortgage to a longer 30-year mortgage. You will pay more money over time, but you will have significantly lower monthly payments. You can always double up your payments later on to pay off the mortgage ahead of schedule. What Length Mortgage Loan Should You Get?
If you are paying private mortgage insurance, or PMI, you can request that it be canceled. If you have paid off at least 20 percent of your loan balance and have a good payment history, lenders will usually agree to cancel your PMI policy. While some lenders will let you know when you reach this milestone, many will not, and it will be up to you to contact them.
To determine how much of your loan balance you have paid off, look at the remaining principal balance on your latest mortgage statement and divide that amount by the original purchase price of the home. If the number is 80 percent or less, contact the lender. While lenders are, by law, supposed to remove PMI once the total reaches 78 percent, you can save yourself money on mortgage payments by requesting that it be canceled as soon as you reach the 80 percent mark.
You can also lower your monthly payments by shopping around for lower homeowner insurance rates. While you are not reducing your mortgage loan or interest, you are lowering the monthly payment, which typically consists of mortgage principal, interest, tax, and insurance payments (collectively known as PITI).
Maybe one of the simplest — and least-well-known — ways of reducing mortgage payments is by finding errors in your mortgage calculations. While most lenders carefully calculate your monthly payments, errors are made, in both the methods used and the final calculations. You would be surprised how many people have found the number to be off, even by as little as $20, which can save you $240 over the course of a year. Review your mortgage bills carefully, and you just might turn up some savings of your own.