How to Lower Your Monthly Mortgage Payments
If you’re reading this article, chances are you’ve managed to get a house (congrats!) and now you’re looking to make your reality even better -- with lower mortgage payments. There are several ways to achieve that, each with their own benefits. To help you get started, we’ve compiled the top methods homeowners use to lower their mortgage costs:
The Big One: Refinance
We’ll start out with the tried-and-true path that most homeowners take -- refinancing their mortgage. If you consider nothing else from this article, this is the one to focus on. Refinancing presents a variety of financial opportunities, including the potential for lower interest rates and/or new loan terms.
Managed to score a rate-and-term refinance with a fantastic, much lower interest rate? You’ll be paying way less in interest each month. And the loan term has been increased? Your loan balance will be spread further out, making your monthly payment lower. The savings over time could be astronomical!
Kick PMI to the Curb
If your original mortgage had private mortgage insurance (PMI) included, ditch it as soon as possible.
PMI is usually required for all homeowners who put down less than 20 percent for their down payment, but it isn’t required that you keep it for the lifespan of your mortgage. Here are some ways you can get rid of this pesky payment:
- Refinance -- a refi means a new loan, which can allow for a fresh start with PMI.
- Appeal to your lender -- If you’ve reached 20 percent or more in equity in your home, you can request that your lender cancel your PMI.
- Hit 22 percent in equity -- your lender will have to cancel your PMI!
Given how expensive PMI can be, getting rid of it is no small success, and you’ll see the benefits of that as soon as your next house payment hits your inbox.
Scrutinize Your Property Taxes
This one takes some research and may or may not be a fruitful venture, but if you’re passionate about lowering your payments, take this into account.
If you have an escrow account linked to your mortgage, you are likely paying property taxes with your mortgage payments, and these taxes would have been calculated by your county when you first applied for your mortgage. In other words, your property taxes are based on the assessed value of your home and land.
This is where a bit of deeper analysis comes in. Find out your property’s assessed value by looking at your tax bill or checking your county’s recording office’s website. If you have any reason to believe that your property has been overvalued, you are allowed to protest the original assessment. You’ll want to provide evidence of comparable home valuations in your area, but if you are successful, your property taxes and thus your mortgage payment will be successfully lowered.
Increase Your Down Payment
This section is for the readers who haven’t yet purchased their home but are doing their due diligence when it comes to researching the process. If possible, consider paying a larger down payment upfront.
Besides being appealing to the homeowners and real estate agents you’ll be purchasing through, this will mean lower monthly payments for the extent of your loan. While we understand that a huge down payment is not feasible for all prospective homeowners, just keep in mind that any increase will be undoubtedly helpful to your future self.
Lowering your monthly payments can be a huge help to your overall budget. If any of these steps seem like an option you can take, we highly recommend that you do -- the lower payments and potential for overall savings will be well worth the effort. If refinancing in particular stood out to you, please be sure to look through our curated ratings and reviews of the top mortgage lenders in the country.