The largest expense that most homeowners have every month is their mortgage. However, just because it is the largest one doesn’t mean it is the only one.
With other bills to pay and items to budget for, a mortgage payment can cause you to struggle to make ends meet. If your finances are feeling the strain and money is a little too tight, try one of these ideas to lower your mortgage payment and be able to breathe a little.
Before the housing market crash, it was relatively easy to obtain a mortgage without making a down payment. While that was nice for buyers that were getting into the real estate market, it left a lot of homeowners without 20% equity in their home. Typically in this case, lenders will require you to pay for Private Mortgage Insurance to assure them they will have repayment if you default on your loan.
However, if you aren’t paying attention, you may end up paying for this insurance longer than you need to. If you have reached the point where your loan is for 80% or less of the value of your house, you can ask them to remove the insurance from your loan.
Even though mortgage rates have crept up ever so slightly this year in some areas, they are still at all-time lows. If you purchased a house several years ago or longer, there is a great chance that you can refinance your current mortgage with a lower interest rate. This will allow you to pay less interest, thus dropping your monthly mortgage payment.
However, some homeowners get trapped into thinking it’s a good time to take out the equity in their home in cash and end up with a larger payment because of it. If you want to lower your payment, make sure you are only taking the lower rate and not additional cash.
Try an ARM
Most homeowners go with the traditional 30-year fixed-rate mortgage. Adjustable Rate Mortgages (ARM) have gotten a bad rap that they don’t deserve, so many people don’t even consider one when obtaining a mortgage. While it can be scary to not have a rate locked in for the future, there are many homeowners that are planning on staying in their house long enough to payoff the mortgage.
If you know that you are planning on selling your house after several years, you can take advantage of the lower rate that an ARM offers you and sell before the rate adjusts higher in the future. However, you have to take into consideration this is taking a risk if your plans don’t go as you thought.
Find an Interest-Only Loan
There are loans available that will allow you to pay only on the interest for ten years, and then for the remaining 20 you pay on interest and principal. This loan is a great fit for those that have seasonal work. You can pay only interest if need be during the months when money is tight, and then you can pay extra on principal during the seasons when there is a lot more money coming in.
If you are serious about getting your monthly payments reduced, start talking to a lender today. They can fill you in on the details of different mortgage programs that could work in a refinance, or what options you have. Your house should be a blessing, and if it feels more like a curse, it is time to make a change.