Today’s economy has forced most people to tighten their belts and live according to a budget. Many people are also opting to lower their mortgage payments. Why? For a number of reasons. Lowering your mortgage payments means that you can have more money for your personal finances and even paying other debts you may owe.
While these may look very attractive to anyone, keep in mind that getting rid of high mortgage payments comes with its own set of risks. Lowering your mortgage payments may mean paying more over the course of your mortgage’s life. Another risk of lowering your mortgage payment is that your equity will build up at a slower rate. This is due to the fact that most of the smaller monthly payments will end up going into the interest.
With these risks in mind, if you’ve decided to lower your mortgage payments, here’s how you can do it.
Qualify for Lower Mortgage Rates
Getting lower mortgage interest rates will allow a lower monthly payment without extending the term length.
How does one qualify for lower mortgage rates? If your current financial standing or financial situation is different from when you purchased your house, then you can qualify for a lower mortgage rate.
Another way to qualify is lower mortgage rates if you can show that you have a very good credit record, if you have paid most of the equity in the property and an accurate documentation or record of your ability to pay your loans without any difficulty. Payment on former mortgages can also dictate on how low your mortgage rate can be. Talk to your mortgage broker on how you can lower your mortgage rates based on what documentation you have.
Extending Term Length
What is term length? It’s the length of time given to you to pay back your home mortgage refinance loan. The average term length is thirty years. If extended, it can be take up to forty years. The extension can help you ease out and lower your monthly payments.
Refinance for a Cheaper Rate
You can refinance your current house loan to get rid of your high mortgage payment. Your rate mortgage can either be an adjustable rate mortgage (ARM) or a fixed rate mortgage. As the name implies, having a fixed rate mortgage means the interest rate doesn’t change, regardless of varying market conditions. Having an ARM means that the interest rate changes, especially when interest rates rise and fall quickly over a short span of time.
Review the terms of your current loan, your credit history, your credit score and the closing costs on a refinance. Talk to a good mortgage broker to weigh your options.
If you decide to take out an ARM, you may find yourself paying for less at the start of the loan, saving you hundreds of dollars in return. Happily, there are many types of ARMs out that you can choose from according to your needs. (Tips on how to refinance a mortgage)
Choose Your Location
Before settling for a house, you may want to consider the county or city where the house is located in. Getting a house situated in a city or county with lower taxes can be a big alleviation to your monthly mortgage payments, despite technically not being part of your mortgage.
If you’ve already bought a house, you may want to consider selling your current house and buying a smaller, cheaper home. In fact, it doesn’t even have to be smaller–you may just have to relocate in the suburbs or the countryside. This will instantly lower your high mortgage payments, if you do get to find a buyer for your current house and a more affordable place you can live in. (see 3 Things you should do before looking for a new home)
Avoid Homeowners Dues
While it’s always great to live in a neighborhood with lots of extra amenities, homeowner’s dues can be quite a drag on your pocket. While technically HOA dues are not part of your mortgage, they are still part of the payments that come with owning a house. Try to avoid extraneous costs like these, and you’ll be surprised at how much money you can actually save.
The trick to getting rid of high mortgage payments is deciding to get lower mortgage payments even before you settle on a house to buy. Be realistic about what you can and cannot afford in the next ten, 20 or even 30 years. Consider your options carefully. It will be easier on you and your pocket in the long run.
Click here for more information about how to get rid of high mortgage payments