Thirty Ways to Reduce Your Mortgage Payments Monthly
1. Refinance into a loan with a lower interest rate. Before taking this step to decrease your monthly mortgage payment, make sure that the reduction is large enough to benefit your finances in the long run.
2. Buy down the rate. If you intend to be in your home for a while, buying down your mortgage rate may be advantageous. In most cases, you can buy one discount point for one percent of your mortgage’s total cost. This will lower your payment.
3. Take advantage of an Adjustable Rate Mortgage, or ARM, loan. This type of loan will likely feature a reduced interest rate that expires in five or 10 years.
4. Shop for a loan. Compare the different terms, options and rates that are available. Select the loan with the lowest monthly payment.
5. Convert an adjustable interest rate loan into one with a low fixed rate. If you began your mortgage under an ARM that recently increased, shop around for a loan with a lower fixed rate to decrease your monthly payment.
6. Request a home reassessment to lower the tax bill for your residence.
7. Pay your mortgage insurance amount upfront. This is an option with a conventional loan. By taking advantage of it, you’ll decrease your monthly payment amount.
8. Obtain an ARM that comes with a payment option. This type of loan allows you to pay a different amount every month. Be aware that with this kind of loan, you will need to make higher payments or a balloon payment later.
9. Make extra payments to eliminate your Private Mortgage Insurance or PMI. Once the amount that you owe on your loan has decreased to 80 percent of the loan-to-value, or LTV, ratio, you’ll be able to unload the extra insurance.
10. If you’re a veteran, be sure to apply for a VA loan. This kind of loan does not require PMI. You can also obtain approval without making a down payment. Keep in mind that interest rates are usually lower with a VA loan.
11. Put more than 20 percent down on your loan. More money down equals a lower monthly payment for the entirety of the loan.
12. Remodel your home to increase its value. With a higher home value, you can request a reappraisal of your residence to decrease or eliminate your
PMI. This step will reduce your monthly mortgage payment.
13. If you’ve suffered from a negative financial incident like a lost job or a major medical expense, you may qualify for a loan modification. When lenders modify a mortgage loan, they typically reduce the interest rate, which decreases the payment. To request one, contact your loan company.
14. Make a larger down payment to decrease the amount of PMI you’re paying. Since the insurance premium is based on the amount that you’re borrowing, you can lower the PMI by putting more money down.
15. Consider paying your mortgage company bimonthly instead of once a month. By taking this payment approach, you’ll decrease your principal balance more quickly. Once it’s significantly lower, refinance your loan to obtain a reduced payment.
16. Ask your mortgage lender to recast your loan. When a lender recasts a loan, the financial institution stretches out your repayment terms without requiring you to refinance the loan.
17. Rent out a room of your home. If you have extra space, consider welcoming a roommate. You can charge him or her a few hundred dollars to live in the space. This effectively lowers your monthly mortgage payment.
18. Improve your credit score. If you can increase the number to 760 or higher, you may be able to qualify for a lower home interest rate.
19. If you don’t already have your mortgage under a conventional loan, consider applying for one and switching. This type of loan typically requires a lower PMI. A lower insurance amount translates into a decreased monthly mortgage payment.
20. Instead of frittering away your tax return, send it to your mortgage company to pay down your loan. Once you’ve done this for several years, you’ll have decreased your principal balance enough to refinance for a lower payment.
21. Refinance into an interest only loan. While this is not a long-term solution since you’re putting off the principal balance, it is a temporary way to decrease your monthly mortgage payment.
22. If you aren’t already purchasing your life, car and mortgage insurance from the same company, then do so. Most insurance companies give you a discount when you buy different types of insurance from them.
23. Check into government programs. For instance, the Making Home Affordable program offers incentives to lenders when they make it easier for you
to afford your home. This may include reducing your monthly mortgage payment.
24. If your lender is a major financial institution that also issues credit cards, then you may be able to qualify for one of the company’s cards that awards points. Some lenders let you use these points to pay your monthly mortgage payment.
25. Refinance your loan into one with longer terms. If you currently have a 15-year repayment loan, then extend it to a 20-year or a 30-year loan. Some banks are offering 40-year repayment loans, so if you have a 30-year mortgage loan, you may be able to stretch it out a little longer.
26. Increase your insurance deductible. When you accept the risk of a higher deductible, your insurance company will decrease your insurance premium.
27. Change your mortgage into one with balloon terms. A mortgage loan with these terms will have a lower monthly payment than a mortgage that’s under traditional terms, but you will owe a larger amount at the end of the loan. Consider this option a temporary one, or enter into a balloon mortgage when you’re planning to stay in a home for a short period.
28. Consider installing a security system. Some insurance companies will decrease your monthly premium when you confirm that your home has extra protection. A lower insurance premium will result in a reduced monthly mortgage payment.
29. Invest money into a savings account that lets you earn interest. Once it builds into a sizable amount, send the money to your mortgage lender. This will lower your principal balance, so if you refinance, your payment will be reduced.
30. Ask your lender for a temporary payment reduction. If you’ve suffered a financial hardship, then you may qualify for a lower monthly mortgage payment.