The monthly mortgage payment is undoubtedly a huge responsibility for every individual who has a home loan. Not only do we have to worry about the principal balance but there’s also the interest rate. With alterations in the global economy and mortgage market, the interest rates often fluctuate. Sometimes the rate goes unnervingly high and sometimes it comes down to a reasonable level.
Now, suppose you have a mortgage loan that requires you pay almost 5% interest, but then the rates go down to 3%. What would you do in such a circumstance? You would likely want to refinance to make the most of the lower rates. In fact, most homeowners would prefer to do that.
Unfortunately, it’s not always that easy to convince lenders to refinance the existing mortgage. If your house is worth less than the amount you owe (aka being underwater), then it’ll be extremely difficult to get refinanced. If you've already paid for a long time on your mortgage, then stretching the time frame through refinance doesn't make sense either. In such a circumstance, when you can’t lower the interest rate through refinance, you’ll have to think about other options to trim down the monthly payments.
6 effective ways to lower your mortgage payments without depending on refinance
So, when refinance isn't a feasible solution, what should you do to keep your mortgage payments reasonable? Thankfully, there are other 6 most effective ways to lower your monthly mortgage payment:
1. Take the right step at the right time. It’s best to evaluate your situation before you start having trouble making the monthly payment. If you’re already facing an unexpected financial crisis, then you must start managing your finances quickly and accordingly. Don’t forget, there is a high interest rate charged on the loan you've taken out and the more you delay your payments the more the amount due will grow. So, inform your lender about your hardship as soon as possible. Also, you might consult with an experienced housing counselor to deal with your lender successfully. The housing counselors who are officially appointed by the Department of Housing and Urban Development can help keep the mortgage costs under control. So, evaluate the actual condition first and start planning properly before you end up accumulating huge mortgage debt.
2. Try hard to pay more. You can effectively reduce the cost of the mortgage by making timely payments. You may have planned to pay off 12 consecutive installments every year. It would be ideal if you could add one extra installment to that plan. If you have a regular source of income, then paying the extra amount shouldn’t be too difficult. The best part is, the extra payment is directly applied to the principle. So, the remaining mortgage balance will reduce considerably and you won’t even have to pay any extra interest on that principal amount. This will provide for huge savings over time.
3. Do away with your private mortgage insurance. When your down payment is not at least 20%, you need to pay separately for private mortgage insurance. PMI or private mortgage insurance is a kind of financial assurance for the lender in case you fail to pay off the loan. This formality safeguards the lender but it hardly does any good for the borrower. So, as a conscious borrower you must make an effort to get rid of the PMI as early as possible. You can request your lender eliminate the obligation of insurance if the mortgage balance falls below the 80% limit of your home’s actual appraised value. This generally happens when the value of your property increases. You can also ask for the cancellation of insurance by paying off a considerable portion of the principal. Just by getting a new appraisal you can potentially save substantially.
4. Opt for regular bi-weekly payments. Bi-weekly payment plans work best whenever you’re in a hurry to pay off your loans. Rather than paying off an exact amount every month you can divide your monthly payment into two equal parts. Create a separate account for your mortgage payment and pay half of your monthly payment from that account every alternate week. At the end of the year you’ll end up paying 26 half installments which equals 13 full payments. This one extra payment each year will make it easier to keep the cost under control. You can either manage the separate account on your own or get the help of escrow services but make sure to check the charges before opting for professional help.
5. Check whether you qualify for loan modification or not. Loan modification is another option that can help you decrease your monthly loan payments. Of course, there are specific conditions that you need to meet to qualify for loan modification. Through loan modification, you can adjust the loan term and interest rate. This makes your monthly payments manageable and you’ll save a lot. To learn about the qualification criteria you may talk with your lender or go through the guidelines of Making Home Affordable.
6. Manage your property tax more carefully. Property taxes can eat up a huge portion of your savings. They’re typically a portion of each mortgage payment held in escrow until the tax bill is due. If the value of your property has decreased and it’s yet to be properly accounted for in the overall tax assessment, then make the correction as early as possible. You can file a petition for the proper assessment. By reducing the tax assessment you can save a considerable amount of money on each mortgage payment.
These are 6 efficient ways you can reduce your monthly mortgage payment with ease and without depending solely on refinancing. So, just follow these cautious, simple ideas to lower your mortgage payment without refinancing your existing loan term.