Oct 04 2021

How to Save On Your Monthly Mortgage Payment

For many homeowners their mortgage payment represents their largest monthly expense.
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For many homeowners their mortgage payment represents their largest monthly expense. Lowering that payment could mean significant savings month after month, year after year, over the course of time owning the home, or until the mortgage is paid off.

Wondering how you could save on your mortgage payment? Here are a few ideas to look into:

Refinance Your Current Home Loan

Depending on the terms of your existing mortgage and other home financing options available to you, refinancing could be an excellent way to lower your mortgage payment. There are a few possible ways to potentially make this happen:

  • Refinance into a loan with a lower mortgage rate.
    If current mortgage rates are lower than the rate you are paying now, you may be able to refinance and save. Some programs will allow you to roll the cost of the transaction into the new loan, meaning you would have few out of pocket expenses related to the refinance.
  • Refinance into a mortgage with a longer term.
    If rates are not low enough relative to your current loan to make a significant difference in your payment, don’t worry, there are other options to consider. If you have been paying on your current home loan for a few years, you could save by refinancing into a new mortgage with a longer loan term. Going from 17 years remaining on the loan to 30 years would likely mean a lower payment each month.
    Keep in mind that extending your loan term will generally mean you will pay more in interest over the course of the loan, but for some homeowners this tradeoff may be worth accomplishing the financial goal of lower monthly expenses.
  • Refinance into a different loan program.
    You may also be able to find a lower rate, and lower payment, on a program that is different from that of your current mortgage. Adjustable rate mortgages have an introductory rate for a period of time that is often lower than the rates available on comparable fixed rate loans. A 3/1 ARM (Adjustable Rate Mortgage) will have that low introductory rate for the first three years of the loan term. 5/1 ARMs, 7/1 ARMs, and 10/1 ARMs have introductory periods of five, seven, and ten years respectively.
    At the conclusion of the initial period the rate will begin to adjust up or down according to current market conditions. Homeowners choosing this option should understand they won’t have the security of a fixed rate mortgage once their rate starts to adjust, but this can still be a great option to look at in some scenarios. Perhaps you only plan to own this home for a few more years before selling it. Or it’s important to have lower mortgage payments in the short term because one income earner is staying home with young children or going back to school.

Thinking about refinancing? Give us a call today for a quote for current mortgage rates.

Lower Escrow Payments

If refinancing isn’t an ideal option right now you may still be able to bring down your monthly mortgage payment. In addition to the principal and interest portion of your home loan payment, it likely also includes escrow payments.

This means that your mortgage servicer collects an additional amount each month with your home loan payment, and uses those funds to pay your homeowners insurance, real estate taxes, homeowners association fees and other expenses as applicable when these items come due. If you can lower these fees, you could see a reduction in your monthly mortgage payment.

Shop around for a better deal on your homeowners insurance. If you have had the same policy for some time there may be more affordable options available to you without sacrificing coverage. It may also be possible to lower the annual cost by raising your deducible.

Check with your local jurisdiction to see if there are any options for reducing your property taxes. There are sometimes available courses of action for senior homeowners, low income homeowners, properties used as a primary residence rather than an investment property, and more. If the value of your home has decreased over time this could also impact what you are required to pay in property taxes.

Move to a Less Expensive Home

Downsizing to a less costly home can be an excellent way to permanently lower monthly housing costs, and perhaps end up with a sum of money from the proceeds of the sale as well. This is a popular option among homeowners with grown children who might not need a large home any longer.

Making the move to a less expensive property doesn’t have to mean sacrificing square footage. Consider a neighborhood where homes cost less or even a city or state with a lower cost of living, and lower cost of real estate.

Want to explore buying a new home? Contact us now to get preapproved for a purchase mortgage.

Talk to Your Mortgage Lender

In times of economic hardship a lower monthly mortgage payment might ease the financial burden for a short period of time. For example, if you have experienced a job loss or medical issue that is causing you to worry about being late with your mortgage payment, or missing a payment, the best thing to do is contact your mortgage lender right away.

They may be able to lower your payment for a period of time, so you can make up the difference a few months down the road when the situation has improved. Available options will vary by loan program, servicer, and the borrower’s payment history, but the most important thing is to communicate early before any payments are missed.

As you can see there are many possibilities that may be available for reducing your monthly mortgage payment depending on your current scenario and plans for the future.

Have questions? Don’t hesitate to reach out – our home financing experts are here to help.

These days, more and more people are looking to buy their dream homes, especially as remote work and work-from-home setups have become an enduring trend. A 15 point increase in requests for home tours and other home-buying services, along with a 11% rise in Google searches for homes, indicate an uptick in demand to buy houses in the country. However, there is a definite worry about affordability when it comes to housing, especially as hefty price tags on available residences have kept the market just as competitive as before, if not more.

According to the latest reports from analysts, it’s not all bad for existing homebuyers and aspiring house hunters. As previous data shows, timing matters in the housing market, and working on different approaches to home buying – like through a reliable lender – can help advance you towards more affordable housing goals. Below, we discuss whether house hunters should buy now or wait, and why.

 

What is your financial situation?


Counter to the rise in home demand, there is a considerable lack of supply. Along with rising prices and interest rates, the housing market may seem like a highly competitive space with wealthy homeowners fighting for what little property is left. It can be overwhelming, but knowing where you stand financially can help you better strategize your home buying journey. Following the four key components of affordability, ask yourself:

  • How much do you have saved for a down payment?

  • How much does your household earn?

  • What debts do you carry?

  • What is your credit score?

 

Familiarizing yourself with these components will help inform your decision on whether or not to wait. For example, taking the time to improve your credit scores before committing can save you from higher interest rates in terms of your monthly mortgage payments. Alternatively, many young homebuyers are compromising by living with family for a significant amount time to save up for a down payment. Getting this out of the way when you’re able to can help you get better loans to buy sooner than later in case interest rates end up increasing.

What kind of home is best for you?

Buying a home is a huge purchase and a big commitment. With shifts to digital and remote ways of working taking place in recent years, this has provided homebuyers with opportunities to be more flexible when buying homes. Homes in areas away from busy cities and urban hubs, for example, are considerably cheaper. This makes them a perfect option for buyers who work from home, or aren’t required to be present in the office on a consistent basis.

The lifestyle you expect to live is as much a factor to consider as money. Condos and townhouses offer lower maintenance costs in the long run, and are perfect for smaller households when compared to single-family homes. If the household grows, homebuyers looking for a side income can even invest in renting out purchased properties to passively earn back what they spent and look into bigger properties for family use.

What does the future look like?


In a previous post, we talked about the rising mortgage and interest rates. While the market may seem bleak or intimidating in its current condition, housing experts also believe factors such as supply have a high chance of returning to pre-pandemic levels by the end of 2024. If you are financially able, buying now while others may be intimidated by the prices can give you an edge. Conversely, taking some time to get your finances in order can benefit you when it comes to securing better loans and lower interest rates.

Working with experts can help you make better decisions for the loans you need, making sure you don’t get trapped with high interest rates or hidden charges. The future of fintech suggests that big data is the future of loans, as more online lenders are now using algorithms, which predict potential defaults better than FICO scores do. Data is also leveraged precisely to identify customers who fit various products well — which can give you peace of mind, as an aspiring borrower. Here at City Lending for example, we find the right programs to fit your needs and profile, making sure you get some of the lowest down payments and interest rates along with a premium service.

And if you’re still unsure, it’s worth considering that waiting it out in the market’s current wild conditions could result in even higher interest rates in the future. At the end of the day, buying a house is ultimately a huge investment, which comes with benefits such as privacy and a financial investment that for the most part will weather most economic storms.

Find out if this is the right time for you to get a house by contacting one of our loan officers today.

 

Content intended only for the use of citylendinginc.com

Written by Alicia Christopher

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