Lower Your Payment

Lower your Mortgage

 

Your mortgage payment is most likely the largest monthly expense you have. That is why it is always wonderful when you are able to lower your mortgage payment to an amount that is much more manageable.

 

This will give you more money to either pay the loan down sooner, be able to afford some things that you can’t afford at the moment or even make up for a situation that has left you strapped for cash, like having your monthly income lowered for some reason.

 

These savings examples are based on a mortgage with the following factors:

 

  • Mortgage of $200,000
  • 30-year fixed rate mortgage
  • 6 percent interest rate
  • $1,199 monthly mortgage payment

 

Once a Year add an Extra Payment

 

The easiest way to save money on your mortgage is to make an extra mortgage payment every year. Extra payments are automatically applied to the principal of the loan and not the interest. This doesn’t just lower the remaining balance, but you will not have to pay interest every month on that part of the principal for the remaining length of the loan.

 

By just adding one extra mortgage payment a year and applying it to your principal, you can save over $47,000 in interest and cut 5 years off the life of the loan.

 

Biweekly Payment Plan

 

Another way to lower the length of your mortgage and pay it off quicker is by creating a bi-weekly payment plan. Put half of your monthly mortgage payment in a savings account every other payday.

 

Each month, pay your mortgage from the account, and at the end of the year, you will have made 26 half payments, which of course is 13 full payments. Doing this will leave you with an extra payment you can put toward your principal.

 

Even though most people can manage the separate accounts themselves, there are companies that can be hired to act as an escrow service to manage the payments for you. If you chose to use one of them be careful because may charge you a fee for the service.

 

Your savings for using this option is $47,000, the same as adding one extra payment every year.

 

Cancel your Private Mortgage Insurance (PMI)

If you put a down payment of less than 20 percent on your loan, you were probably required to pay private mortgage insurance (PMI). However, as soon as your mortgage balance falls below 80 percent of the home’s appraised value, you can petition your lender to cancel the insurance.

 

This can also be done if your home’s value has gone up or you have repaid some of the principal. You may need to get a new appraisal of your home, however, you could shave hundreds of dollars off your monthly mortgage payment.

 

If you only put 5 percent down on your home and had a PMI rate of 0.78 percent, you could save $130 per month.

 

Lower your Assessment

You can be required to pay thousands of dollars a year in property taxes. If you think your home’s value has decreased in the last year and it was not properly accounted for in your tax assessment, you can petition your assessor and fight your assessment. Being able to lower your assessment will lower your yearly taxes, your savings will vary based on your tax rate and assessment but you could save hundreds of dollars a year.

 

Reset your Mortgage

This isn’t a widely known process, but some lenders will allow you to reset (recast) your monthly payment if you make a large payment toward the principal of your mortgage. Your monthly payment will stay the same, but you shorten the term of your loan.

 

When the loan is recast, your monthly principal and interest is recalculated so you end up with a lower monthly payment over the existing term of the loan. For example, if you make a one time payment of $20,000 into your loan, your payment would be reset to $1,079, saving you $120 per month.

 

Modify your loan

If you are currently going through a financial hardship, and are late on your loan payments, you may be eligible to modify your loan, such as rate, term or principal balance, to make it more affordable.

 

The goal of these programs is to allow borrowers to remain in their homes and continue making their monthly payments. This doesn’t mean that everyone will qualify for this type of program. However, if you do qualify, you can save a lot of money. Contact your mortgage servicer to see if you qualify.

 

Your savings will vary based on your eligibility.

 

Refinance

 

The most common way to save money on your mortgage is to refinance your mortgage to a lower interest rate. Reducing your rate can lower your monthly payment and help you save on interest payments.

 

One thing you need to keep in mind if you are thinking of refinancing your current mortgage is that there are costs which are associated with refinancing, so you want to be sure you are going to save enough to offset any refinancing fees you may incur.

 

With interest rates and historic lows, if you can refinance, and you haven’t already, you should consider doing so. By lowering your interest rate to 5 percent, you could take your monthly payment down to $1,073, which would save you $126 per month. If the refinance fees cost $5,000, you would recoup the fees after 40 months.


Since the cost of living will continue to rise, several people are looking for ways to lower expenses and reduce their mortgage payments. A monthly mortgage payment takes up a large part of your monthly income.

 

If you enjoyed this article and need a professional writer for your own blog, please feel free to send me an email, or check out my profile on oDesk.

 

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