4 ways to reduce your mortgage payments
A mortgage is among the highest monthly expenses for most people, weighing you down and leaving little money each month for other expenses. High mortgage payments may be a burden, mainly if you’re working with a tight budget.
If your mortgage takes a significant part of your budget, looking for ways to minimize your payments, including your mortgage, can help free up your finances while saving money. Saving money on your mortgage allows extra cash flow that you can use for several financial needs. Discussed below are four ways to reduce your mortgage payment.
1. Refinance with a lower-interest loan
Mortgage refinancing involves replacing the current home loan with a brand-new one. A mortgage refinance comes with multiple rewards, including:
- Lower your interest rate: When paying the mortgage, you do it against the interest and principal your provider charges on your home loan. A lower interest rate means paying less in interest over time, meaning you pay more of the principal every month to clear your mortgage faster or free more of your monthly expenses
- Switch to a fixed rate from an adjustable one: If your mortgage rate is adjustable, the interest rate can rise or fall over time, depending on market conditions. Refinancing your mortgage, mainly when interest rates are low, can help you lock in a fixed-rate
With the help of reliable mortgage loans, such as the Associates Home Loan, you can refinance your loan for low-interest borrowing.
2. Overpay your mortgage
Making extra payments towards a mortgage can significantly lower the interest amount you pay in the end by lowering the outstanding home loan balance while letting you minimize your monthly payment. Overpaying your mortgage can also help you become mortgage-free quicker.
If you wish to overpay your mortgage, you may make monthly extra payments or a lump sum. The primary advantage of overpaying is that you can stop making overpayments when you wish. You can alter your overpayment to align with your affordability, provided it’s within your overpaying capacity.
3. Eliminate private mortgage insurance
If you purchased your property with less than a 20% down payment, you likely had to add PMI (private mortgage insurance), significantly raising your monthly payments. PMI is meant to help your loan provider avoid financial loss if you default on your mortgage payments. Luckily, the PMI doesn’t last a lifetime. There are various ways to get rid of PMI, including:
- Waiting until you qualify for final or automatic PMI qualification
- Paying down your mortgage sooner
- Requesting PMI cancellation upon your mortgage balance reaching 80%
- Refinancing your mortgage
- Renovating or expanding your home to raise its value
- Reappraising your home
4. Consider shopping around for more affordable homeowners insurance
If your monthly mortgage payments include homeowners’ insurance, shopping for lower homeowners insurance rates can reduce the overall monthly payments. Shortlist several prospective insurance providers to get quotes and consider asking for discounts. Depending on specific home features like fire alarms and security systems, you can save money.
In addition, combining your homeowners’ insurance with your vehicle policy and other policies can save you money. Reviewing your coverages can also ascertain you aren’t paying for what you don’t require. Increasing your deductibles can also help ensure lower premiums.
Endnote
High mortgage payments can be a headache, especially with a strict budget. Use these tips to lower your mortgage payment.