If you want to start reducing the overall size of your mortgage payments on a regular basis, you will be happy to know that there are plenty of different ways of doing so. The more of this information you have, the more likely you will be to reduce the amount of money you spend on your house each month.
1. Consider an Exotic Mortgage
An exotic loan product such as an adjustable rate mortgage (ARM) will mean that your payment will be significantly less, but there is still the risk of costing more in the long term than with a fixed rate conventional loan. You will want to take the time to weigh this risk before making a final decision.
2. Look at all Loan Costs before making a Commitment
While it might seem a little bit simplistic, you will definitely want to make a point of looking at all of the costs associated with the loan before making a final commitment. Make sure to ask your mortgage lender to give you all of the documents for the various loan products that are available to you. While the FHA might look good at first, the extra mortgage insurance you will end up paying for it might change your mind.
3. Buy Down your Rate
Buying discount points might seem like a waste of money, but it can actually be a very effective way to reduce your payments if you have the additional money to spare. You can usually buy just one discount point for one percent of your mortgage’s overall cost.
4. Make a Bigger Down Payment
Putting more money down on your loan to begin with can definitely be a good way to reduce your monthly payments, so you will need to keep this in mind as well. The larger your down payment is, the less you will have to pay on a regular basis.
5. Pay all of your Mortgage Insurance Upfront
If you really want to reduce the amount of money you spend on your mortgage each month, you might want to think about paying for your mortgage insurance up front in full. While your lender might not have told you about this option, it can be a good way to go. The savings from doing this can be quite substantial.
6. Reduce your Homeowner’s Insurance Costs
If you happen to have an escrow account, part of your payment will go towards your homeowner’s insurance. The easiest way to go about reducing the cost of your homeowner’s insurance to get quotes from different companies. The more quotes you get, the less money you are likely to pay for it overall.
7. Have your Home Reassessed to Reduce Taxes
The fact is that property taxes can actually make up a big portion of what you pay into your loan if you have an escrow account. If you want to reduce how much you pay on your mortgage, you should think about calling your assessor to find out how to go about lowering your home’s tax assessment right away.
8. Make Bi-Weekly Payments to Reduce Principal and Mortgage Insurance
If you absolutely need to start reducing your monthly mortgage payments right now, you will want to start making bi-weekly payments. You should definitely think about making 26 bi-weekly payments, and your lender can set it up for you so you will receive a regular statement.
9. Pay down your Principal and Remove Mortgage Insurance
Focus on paying down the principal of your loan and take off mortgage insurance. This can be an extremely effective way to go about reducing the amount of money that you spend on your mortgage month to month. Keep in mind that this will really only work with conventional loans.
10. Remodel and Increase LTV to Remove Mortgage Insurance
You can also get rid of your expensive mortgage insurance by doing some heavy remodelling, or at least enough to where you can boost your home’s value and your LTV to 80 percent or below. Just make sure that you don’t make improvements just so you can improve your home’s value unless it has a functional defect of some kind.
11. Have your Mortgage Recast
Recasting your home loan might be a good idea if you have been making extra payments but something has gone really wrong in your life. Ask your bank to recast your loan so the money you still owe will be stretched out over 30 years.
12. The Home Affordable Modification Program (HAMP)
If you are going through some very financially challenging times and need to lower your mortgage payment, there are a number of federal loan modification programs available. Take the time to look into some of these programs, as one of them could help you out a lot.