Lowering Your Mortgage Payment Without Refinancing
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Financial stress can hit anyone hard, including you. Expenses are up, while your paychecks stay the same. You feel your debt growing and bill payments leave you with barely enough money to survive. Maybe everything in your life has gone wrong, and it’s ruining your ability to pay your mortgage.
A too large mortgage might devour an entire paycheck, maybe even two! So, you investigate how to lower your mortgage, in order to free up some finances for other expenses. You learn about refinancing, but when you apply for it, you don’t qualify. Maybe your credit isn’t good enough or you purchased your home too recently, but either way, you can’t refinance. Luckily, there are ways to lower your mortgage payment, even without refinancing.
Get Rid of Your PMI
Private mortgage insurance (PMI) is a type of insurance that protects the lender if the borrower fails to pay the loan. It’s typically an expense first time home buyers aren’t aware of. The homeowner is required to pay for PMI as long as they have paid off less than 20 percent of the total home loan. PMI can be paid for in a one time payment at closing, yearly, or monthly.
If you are paying for PMI in a yearly or monthly expense, there is a way to get rid of it and save money for the long term. This might require dipping into your savings, but if you are able to pay off 20 percent of your mortgage, you no longer have to pay for PMI. It’s important to remember that when you pay for PMI, that money is not helping pay off your home, it goes directly to the insurance company.
Once you hit that 20 percent threshold, you can reach out to the insurance company and cancel your PMI. Make sure to contact your lender and inform them what is happening and double check you’ve hit that 20 percent point. This could save your hundreds of dollars every year.
Extending Your Loan
Another solution to lowering your monthly payments is by extending the time period of your mortgage. Re-amortizing (or re-casting) is where you simply extend out the timeline for paying off your loan with your lender. For example, taking a 30 year mortgage loan and re-amortizing it to become a 40 year mortgage loan.
By doing this, it spreads out your total loan and you have to pay less every month. Unlike refinancing, re-amortizing your loan doesn’t require a credit check, only a small one-time fee around $250.
Be aware though that extending your loan might lower your monthly payments, but it won’t lower your interest rate. That can mean you’ll end up paying more in the long run thanks to interest.
Extending your loan is a good solution if you need financial relief now. Lower monthly payments means more money can go towards other bills, but you will have to pay more on your home in the long run.
Lowering Your Property Taxes
The government determines how much to tax your home by going off how much they think it’s worth. Not how much you paid for it, nor what other real estate experts think, what they believe the home and land is worth.
Sometimes, that value is incorrect. One way you could lower your monthly mortgage is to dispute your property taxes. If you think you are paying too much property taxes and that the government has over-valued your home, you can request for it to be lowered.
The process for this is different everywhere, so check with your local city and county governments. Typically, there is a board in charge of property taxes and you need to submit an appeal to them. Then, you include relevant information that states your case, including how much you paid for the home, how much similar homes are selling for, an independent evaluation of the home’s worth, etc.
If the board determines that your home has been overvalued, then they will lower your property taxes, thus saving you money.
Selling your Home
If none of these solutions work for you, your credit score is too low to refinance, and your mortgage payments are too high, maybe it’s time to sell your home. There is no shame in not being able to own a home, and you need to take care of your finances.
Selling your home, especially if you’ve had it for a few years, could mean a big boost to your savings if you sell for a profit. Then, you can find a more affordable housing option, like renting an apartment or smaller home, and wait for a better chance to buy again. During that time, you can build up your credit, grow your savings, and investigate ways to get a more affordable home.
Remember that you always have options, and you can even couple them together to get your mortgage as low as possible. Investigate all options, meet with a financial advisor, and plan out what will be best for you. If nothing works and you are still struggling to pay your mortgage, sell your home and try a different solution. That way, you don’t risk ruining your credit and finances with a foreclosure and instead become more flexible in your housing situation.
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Ben Allen is a freelance content creator and digital marketer who believes in helping small businesses succeed. He spends his free time bragging about his two daughters, eating stuffed crust pizza, and playing video games.
This post was updated December 21, 2017. It was originally published December 22, 2017.