Articles proclaiming “Three Easy Ways to Lower Your Mortgage Payment” or “Easy Solutions to High Mortgage Bills” are flourishing online. The truth is that there are no “easy” ways to decrease the amount that you must pay to own your own home; however, it is possible to save money on a home mortgage if you are willing to invest the time and research required to do so. The following methods of saving money on a mortgage all work, but determining the best answer to your personal mortgage dilemma may take some serious analysis:
Saving on Interest
If you did not get a good interest rate on your home initially because of bad credit or because the interest rates were running higher than average when you closed on your home, it may be time to check into refinancing. This is especially true if interest rates have gone down as much as two percentage points or if you have proven yourself to be a good credit risk by consistently making payments for several years.
A riskier method of getting a good interest rate is to go with a variable rate loan. This type of mortgage almost always carries a lower rate initially, but after the short guaranteed period of lower rates, it is possible that rates will sharply increase. Unless you are good at reading economic indicators or plan to pay off the mortgage during a short term period, this method of saving may not be for you.
The interest paid on a mortgage can also be reduced by repaying the loan in a shorter time period. This makes the payments higher but will save the home owner a bundle of cash in return. Ten and fifteen year mortgage loans require steep payments, but the pain is over quickly, and the amount wasted on interest is significantly reduced.
Another way to save on interest is to repay the loan quicker than the original schedule dictates. Some homeowners round up their house payment each month to the next hundred. Others try to make an extra payment at the end of each year. Homeowners should use the method their budget can stand; the more money they pay each month, the less they will pay in interest over time.
Cancel Private Mortgage Insurance
If you didn’t have a qualifying down payment when you first bought your home, it is possible that you were forced to have private mortgage insurance added to your payment in order to protect the loaning institutions investment. If you have been in your home for several years and consistently made payments, this might be the time to ask the bank to reappraise the value of your property to see if you have paid enough to drop the PMI. This will lower your payment, and the money saved should be more than enough to pay for the new appraisal.
Other ideas for lowering your mortgage payment include loan modification or refinancing. Use an online calculator or check with your banker to see if these options are a good idea.