A big portion of your salary can be consumed by your mortgage payment, leaving you with a little left over to support the rest of your regular living expenditures.
As a general rule of thumb, we recommend that you strive to keep your mortgage costs as low as possible, preferably under 30 percent of your gross monthly income.
If you’re wondering how to lower your mortgage payment, there are a variety of options available to help you achieve your objective. Here are nine strategies for lowering your home payments.
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1. Extend the time period for which you must repay your debt
Extending your mortgage term is a simple approach to minimize your monthly mortgage payment (which is also referred to as re-casting or re-amortizing). It is not necessary to refinance your mortgage in order to accomplish this, as most lenders will simply provide this service for a cost of approximately $250.
You will pay less in monthly mortgage payments if you convert your 15-year mortgage to a 30-year mortgage. This is because you will have more time to repay your loan because the term has been stretched out. While you will wind up paying more interest on your mortgage over time if you choose this option, it is the greatest choice for borrowers who require an instant answer to cash flow problems.
2. Put a larger down payment on the house
When purchasing a property, consider making a substantial down payment in order to keep your monthly mortgage payment as low as possible. While it is recommended that you put down at least 20% of the purchase price if you are not in a rush to buy, check if you can set aside even more money.
The greater the amount of money you put down on your property, the cheaper your mortgage payment will be. Furthermore, if you put down at least 20% of the purchase price, you will not be required to pay private mortgage insurance, which will save you a significant amount of money.
3. Remove your PMI from your life
In the event that you purchased your home with a down payment of less than 20% of the purchase price, you will almost certainly be required to pay mortgage insurance in addition to your regular mortgage payment. This can add tens of thousands of dollars, or even hundreds of thousands of dollars, to the total cost of your home loan over the life of the loan.
On the other hand, the good news is that PMI can be eliminated. First and foremost, you must pay off enough of the mortgage that you have at least a 20 percent equity stake in your house.
After that, you can request that your lender cancel your PMI. Depending on your lender, an appraiser may be dispatched to your home to verify the amount of equity you have in your home. If the equity is removed, your mortgage payment will be reduced accordingly.
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4. Select an interest-only mortgage as your fourth option
In the event that you obtain a mortgage, some lenders will not force you to begin paying down your balance immediately and will instead provide you with an interest-only loan.
A two-stage process occurs with interest-only (I/O) mortgages: the first phase, during which you just pay the interest on your mortgage, and the second phase, during which you pay off the real principal balance of your mortgage plus interest.
If you have a 30-year mortgage and pay only interest for the first five years, your monthly payment may appear to be very low, but you must pay off the remainder of your mortgage in the following 25 years, which may seem impossible.
However, if you intend to increase your mortgage payments after the interest-only period has expired, interest-only mortgages can be an effective temporary method of lowering your monthly mortgage payments.
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