The term “mortgage” refers to a loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property serves as collateral to secure the loan.
A high mortgage payment can feel like a burden, especially if your monthly budget is already tight. And the pandemic has made things tougher for many homeowners. The longer you carry a mortgage, the more you pay in interest. By paying off your mortgage early, you may save significantly due to the additional cost of interest, especially if your home loan had a high-interest rate when you took out your mortgage. There are some different ways which would help you to lower down your mortgage payment are listed below:
Refinance to get a lower interest rate: –
A lower interest rate can mean big savings. If you’re looking to lower your mortgage payment, keep an eye on the market. Look for rates that are lower than your current interest rate. When mortgage rates drop, contact your lender to lock your rate.
Another way to get a lower rate is to buy down your rate with points. Mortgage discount points are upfront prepaid interest paid as a part of your closing costs to get a lower rate. Each point is 1% of the loan amount. For example, on a $200,000 loan, one point would cost you $2,000 at closing. One mortgage point generally results in an interest rate reduction of .25% to .5%. However, reducing your rate by half a percent could save you thousands over the course of a 30-year loan.
Keep in mind that mortgage refinances are different from a mortgage recast, which is a lump-sum payment you pay toward your remaining principal. Both, however, may give you an opportunity to cut down on your mortgage bill.
Extend The length Of Your Mortgage: –
As a lower payment is your goal, then extending the length of your mortgage with loan modification can help you get there. Gaining more time to repay is another popular reason for refinancing. If you’ve made payments on a 30-year loan for a few years, for example, you could refinance the remainder back out to 30 years. This would likely result in a lower monthly payment amount.
But refinancing for another 30-year mortgage means you’ll be put on additional interest charges, especially if you’ve been making monthly payments for a significant amount of time. So, weigh the pros and cons of this option carefully to be sure that it’s the best way to reduce your monthly mortgage payments.
Compare Interest Rates Online: –
It’s necessary that you do proper research on loan products and compare rates before deciding on a particular product or lender. There are several third-party websites that can give you a clearer picture of the rates and other charges levied by different lenders. So, it’s best you compare the home loan interest rates for all banks first and then decide on a particular bank or home loan product. Bundling your homeowner’s insurance with your auto insurance and other policies could save you money too.
Just make sure you know what coverage your lender requires if you’re reducing or eliminating anything. A good insurance agent should be able to help you find ways to save money while making sure all your bases are covered.
Home Loan Balance Transfer Can Be an Alternative: –
Balance transfer comes into the picture only when you have already started making prepayments against your loan. If you feel that the interest rate charged by your current lender is a bit on the higher side, you can transfer the remaining principal amount to another bank or lender at lower interest rate. However, balance transfer should be your last resort. Any missed payments on balance transfer-based loans invite higher penalties. So, go for home loan balance transfer only if you have no other option left.
Pay More as Down Payment: –
Most banks and other financial institutions finance 75% to 90% of the total value of the property. You are required to contribute 10% to 25% of the remaining cost of the property. However, instead of paying the least, it’s better to contribute more from your pocket as down payment. The higher you pay initially, the lower is the loan amount, which directly reduces the interest you have to pay as well.
The Bottom line: Be attentive: –
Anyone can easily ease up your Monthly Mortgage Installment by applying above steps as Refinance to get a lower interest rate, Extend The length Of Your Mortgage, Compare Interest Rates Online, Home Loan Balance Transfer Can Be an Alternative and Pay More as Down Payment
With so many options, it’s important to be attentive on your long-term financial goals to guide you to success.
Partner at LiteFin