If you’re struggling to make your mortgage payment each month, there are some steps you can take to lower the cost of this major bill. Try these proven strategies for lowering your monthly mortgage payment. Speaking with a mortgage professional can be the first step in discussing these options and others.
Most financial experts say the most effective way to lower your mortgage payment is by refinancing. However, you typically need good credit to qualify, and you have to have some equity in the home unless you’re prepared to put money down. For those reasons, refinancing isn’t an option for everyone. If you can qualify, do the math to find out how much you can save both monthly, and over the life of the loan. Avoid refinance loans that extend the term, since you’ll often pay more in interest although you’re saving monthly.
Find Out if You Qualify for HAMP
The Making Home Affordable Modification Program (HAMP) is a federal initiative designed to help those who cannot refinance the mortgage and have difficulty affording the payments because of financial hardship such as job loss. To qualify, the home in question must be your primary residence. Your mortgage must date before January 1, 2009, and have a balance of less than $729,750. The monthly payment, including principal, interest, taxes, insurance, and other fees, must exceed 31 percent of your current gross income.
Pay More on the Principal
If you can’t refinance because your loan-to-value ratio is too high, paying down the principal can earn you enough equity to do so. If you come across “lost money“–like a tax refund or windfall through an unclaimed money by person name service–put it toward your mortgage. This not only gives you the option of refinancing so your monthly payments become more affordable, but also allows you to pay off the mortgage more quickly.
Buyers who purchase a home with less than 20 percent down are required to pay private mortgage insurance, or PMI, for the life of the loan. While lenders are legally obligated to drop PMI when your equity reaches 22 percent, you can request in writing to have it dropped earlier if you have 20 percent equity in the original value of the home or if you get your home appraised for a higher amount, thus increasing your equity.
If your mortgage payments are too high and you want to free funds for other things, try these four strategies to potentially lighten the load of this loan.
Connect with Rosella Campion @ Mortgage Master for more mortgage advice.