Want Lower Monthly Mortgage Payments? Check Out These 3 Options!


Are you a homeowner? Have you looked at your mortgage options in the last 12 months? Why not?

We’ve got six big words for why staying on top of these options is a benefit to anyone with a mortgage: You can lower your monthly payments!

Many of us have heard the phrase “refinancing” but don’t actually know what that entails. It’s as simple as it sounds—financing something again—usually with the intention of spending less money than before.

There are three common methods by which this can happen:

01) Removing Monthly Mortgage Insurance

Most people who buy a new home are required to pay for monthly mortgage insurance as well, a form of guarantee that recompensates lenders if the borrower defaults on their loan. This is required for any loan that is backed by the Federal Housing Administration, or homes where the buyer puts down less than 20 percent as a down payment.

Here’s where it’s important to stay on top of your mortgage options. There’s a chance, several years after moving into a home, that the property has developed enough equity that mortgage insurance is no longer required. This means that no mortgage insurance payments are required either, of course. As private mortgage insurance costs .05 to 1 percent of a loan’s value per year, this could save you nearly $2,000 a year on a $200,000 loan.

Although unlikely, equity can cover this gap in as little as two years. Those who have been in a home for at least five years should definitely look into this option.

02) Get A Lower Interest Rate

This one is pretty self-explanatory: If there’s a lower interest rate available on the market than the one that you originally financed your home with, take advantage of it!

03) Lower Principal Balance

This is certainly the easiest, or most guaranteed method. Let’s say that you take out a $200,000 mortgage on your home. At what point do you owe the most money? Obviously right at the onset of the loan, as that principal balance (the money you owe) decreases every time you make a payment.

Your monthly payments are amortized, or fixed, based on that original principal balance. However, if you refinance, you can bring that original amount owed down to the current amount that you owe. Re-amortization means you would pay the same interest, but that amounts to a lower monthly payment, based on the lower principal balance.

Keep in mind that this option involves entering another 30-year plan, as you still need to pay off the full amount in the end.

The best news about refinancing? You’re not forced to choose just one option if all are available to you. It’s what we like to call a trifecta: the situation where a homeowner can cancel mortgage insurance payments, lower their interest rate, and reset their principal balance for the ultimate in monthly payment cost-cutting.

Speak to your lender to find out which options, if not all, can be applied to your payments. 

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