For homeowners with a huge home mortgage, it can be frustrating to watch most of your paycheck goes to your monthly mortgage payments every month.
If you are in this situation, there is still hope. There is a way to close that gap: by trading your old mortgage for a better deal, you could be saving thousands of thousands of dollars over the lifetime of your mortgage.
According to Value Penguin, the average 30-year mortgage rate in 2019 is 4.12% while the best interest rate is around 3.5% . Switching from the average interest rate to the best interest rate would lower your monthly mortgage payments.
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1. Negotiate with your lender to lower your monthly mortgage payment.
You can always give your lender a call and negotiate to lower your mortgage payments. Negotiating your current loan could lend you to a better deal and therefore save you more in interest every year.
This is what lenders call a “loan modification.” Basically, a loan modification is when a lender takes into account your financial situation and work with you to lower your mortgage payments by either reducing your interest rate or extending your payments.
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When looking to modify your interest rate, make sure you have something to show for. If at the time your bought your first house, you did not have a good credit score, before you start negotiating, try to raise your credit score.
A good credit score tells a lender that you’re a strong borrower and that you’re able to manage your finances well.
Another thing you have to make sure you go over before negotiating is to look at your payment history. If you make your mortgage payments on time, a lender is more likely to work with you on a payment plan.
Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.
2. Switch to another lender.
If you cannot get a negotiated rate with your lender, be ready to walk away and switch to a lender with a better mortgage rate.
This is what is called refinancing. Refinancing is the process of applying to a new mortgage, which in turns replaces your old mortgage in the hope that your mortgage rate is reduced, or that your mortgage is paid off faster.
So, after you have compared your current rate with rates from various lenders in the market and found one that suits you, all you will have to do is:
- Apply directly with that lender
- Gather all of the important documents including pay stubs, bank statements, your current mortgage papers, your credit score, etc.
Sounds simple enough? check out and compare the best refinancing mortgage rates to find the best deals for you, and make the switch today.
3. Get rid of your private mortgage insurance.
Your private mortgage insurance or PMI is an added expense that makes your monthly mortgage payments bigger. Getting rid of it can help you immensely.
If you took out an FHA loan or conventional loan and make a down payment of less than 20% on a home, then you’re paying a PMI. A PMI, plain and simple, is buying insurance on your mortgage. It protects the lender in case you default on the loan.
A PMI can be a good thing because it allows a borrower to get financing to buy a house if they can only afford to put less than 20% of the home’s price. But there is a price. PMI costs between 0.25% to 2% of the loan balance per yer.
A homeowner pays their PMI until there is enough equity in the house. So once you have built equity in your home, talk to your lender so that they can eliminate that monthly mortgage insurance. The law requires them to automatically cancel it.
4. Make a larger down payment.
One of the best way to have a lower monthly mortgage payments is to put a larger down payment when buying a home.
It’s recommended to put 20% down, which means you won’t have to pay private mortgage insurance. But if you can out aside more, the better.
Related: How to Save For A Down Payment Fast
5. Rent a room in your home.
If the options suggested above are out reach, you still can reduce your monthly mortgage payments by renting a room in your home.
An extra tenant paying you $500 a month, can help reduce your mortgage payment a lot.
The bottom line
If your monthly mortgage payments leave you with very little money to cover your other expenses, consider the options above to reduce your mortgage payment and save thousands and thousands of dollars over the life of your loan.
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