304 North Cardinal St.
Dorchester Center, MA 02124
304 North Cardinal St.
Dorchester Center, MA 02124
The responsibility of handling mortgage payments every month may prove to be an unbearable financial burden due to its demanding nature. A slight yet permanent decrease in the obligatory amount ensures more freedom with the budget management and mental relief that will bring another level of comfort and reassurance to your home.
If you wish to find yourself in a similar tranquil situation, you are eager to know the answer to the following question: How to lower mortgage payment?
You can lower your mortgage payment by refinancing to a cheaper interest rate, removing mortgage insurance, or extending your mortgage term. Federal loan modification programs and home tax reassessment can also help lower mortgage payments.
Each distinct strategy presents a set of requirements you will have to account for. Due to the complexity of the topic, I am taking it upon myself to go over what you should consider when opting for a suitable approach.
I will teach you how to make the most out of your current situation and utilize each method properly.
Before I explain how to apply each method, I should emphasize that you will likely have to pay more interest in the long run.
The sacrifice is worth it, considering the immediate financial relief.
You will ultimately have to base your decision on your circumstances. With that being said, let’s look into the first strategy.
The first option revolves around refinancing at a lower rate. You don’t even realize how much of a difference a single percent decrease in the interest rate can affect your monthly debt obligation.
I will visualize your potential saved funds with an example.
Let’s say that you have taken out a $200,000 30-year-fixed loan. If you reduce the interest rate by 1%, you will save upwards of $100 per month, depending on the contract terms. While such a decrease seems insignificant at first glance, it can save you thousands in the long run, provided you plan on staying in your current home for years to come.
I should also underline the possibility of you buying mortgage discount points. It will have a similar effect as far as interest reduction goes.
You are more likely than not to pay mortgage insurance on top of your base mortgage payment if you bought a property with a down payment of less than 20% of the total purchase price.
The additional charge contributes to the cost of your home loan by tens to hundreds of thousands of dollars.
You can entirely drop the personal mortgage insurance (PMI) once the home equity you have covered through monthly payments hits 20%. Your lender will likely send an appraiser to verify whether you have indeed reached the threshold in question. If confirmed, you will be rewarded with a reduction.
Extending your mortgage term is another approach to minimizing your monthly payment (also referred to as re-casting or re-amortizing). To accomplish this, you don’t need to refinance your mortgage, as most lenders will provide this service for a cost of around $250.
Simply switching from a 15-year mortgage to a 30-year mortgage will drastically affect your monthly loan obligation. You will cut down on the monthly payment by a couple of hundreds.
I will tell you a secret strategy very few people are aware of. There are a few federal loan modification programs to pick from if you are having financial difficulties and need to lower your loan payment as a result. They are available via your lender. To decrease your monthly mortgage costs in the short or long term, you must fulfill a set of qualifying requirements.
Although you will save funds every month, thanks to a healthy monthly payment decrease, there are some drawbacks that you should pay attention to.
Refinancing your mortgage comes with its fair share of disadvantages. If you are refinancing into a longer-term loan, you may save little to no money in the distant future due to the increase in paid interest. You also have to pay closing costs like you did when first purchasing your home.
When you extend the mortgage rate, you deprive yourself of an opportunity to experience a special milestone sooner. The moment when the last mortgage payment is processed is something that every homeowner is looking forward to.
Be careful with the way you handle the process from beginning to end.
By lengthening the mortgage term, you will face similar issues as with refinancing. The most significant factor here is assessing your unique situation and weighing the pros and cons.
If a lower monthly payment is what you are after, it will be no problem to deal with the eventual negative consequences.
You can put down a substantial down payment when purchasing a property. The more money you spend on the down payment, the cheaper your monthly mortgage payment will be. Furthermore, if you put down at least 20%, you won’t need to pay for private mortgage insurance, meaning more saved funds.
If you intend to lower your mortgage payment, there a quite a few strategies you can utilize to fulfill your goal.
Refinancing to a cheaper interest rate, removing mortgage insurance, extending your mortgage term, federal loan modification programs, and home tax reassessment.
Keep in mind that a decrease in your monthly mortgage cost brings notable drawbacks with it, which may cause you inconveniences in the long run. It is of utmost importance that you examine your situation and plug in the numbers to find a definitive solution on which option caters to your needs.
If you are satisfied with the calculated outcome, feel free to enjoy the decreased debt obligations!