Buying a home is one of life’s most exciting milestones. Homeownership can feel like a dream, but the accompanying mortgage payments can bring you right back down to reality. Mortgage payments can really take a toll on your finances. And according to Nerd Wallet, they’re the largest expense homeowners have after signing on the dotted line.
5 Clever Ways To Lower Your Mortgage Payment
Paying off your home’s mortgage can be a big pain, but fortunately, it doesn’t have to be. There are quite a few ways to shave off a chunk of your mortgage payment so you can put your money toward other important things, like groceries or self-care. To learn how to lighten your financial load, here are five ways you can reduce your mortgage payment:
Refinance to a lower interest rate.
A common way to lower your mortgage payment is to refinance your home loan. Research interest rates in your area to see if they’ve dropped since you purchased your home. If they have, you could have a better chance of obtaining a lower rate by refinancing.
Before you act, review the numbers to make sure that the costs of refinancing will pay for themselves over time through a reduced monthly payment. You should also be on the lookout for no-closing-cost loans that let you refinance without having to pay costly fees.
Make extra principal payments.
A mortgage principal is the amount of money you borrow and then pay back, plus interest, over time. And when you pay extra toward your mortgage principal, you can lower the total interest amount you’re required to pay, which helps you pay it off faster.
To reduce your payment, consider adding an extra $100 or $200 per month to your mortgage principal to decrease your loan repayment timeline. Not only can this help lessen the amount of interest you have to pay, but it also lowers your payment a lot sooner.
Modify your loan term.
A great way to lower your monthly mortgage payment is to adjust your repayment term. For example, if you were to jump from a 30-year mortgage term to a 15-year mortgage term, the repayment period becomes shorter. If you can afford the higher payments, paying less in interest over time is certainly worth it.
Refinance to lower monthly costs.
Another option is to try cash-out refinancing, which converts your home equity into cash that you can use to pay off debts or fund home improvements.
In order to lower your payments, you’ll have to take out a brand new mortgage that amounts to more than your current one. Keep in mind that even though your loan amount rises, you could potentially snag a lower interest rate. So carefully evaluate the numbers because a lower rate can mean a lower monthly payment.
Lower your home insurance costs.
Researching home insurance is another way to lower your mortgage payments. Many home insurance plans include more coverage than you need, which can lead to higher rates. You can avoid this by carefully reviewing the different home insurance plans to find one that covers only what you need at a rate that’s affordable to you.
Remember, you can always change your home insurance, especially if it doesn’t serve you. Every year, try shopping around for lower premiums, raise your deductible, inquire about discounts, and compare quotes to make an informed decision about coverage options. If your insurance costs are low, you have more money to pay down your mortgage principal a lot faster.
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