How to Lower Your Mortgage Payments Making sure you have an affordable mortgage is vital for your security and stability. However, finding a mortgage you can sustain in the long run requires
From the Colonel - September edition - How to Lower Your Mortgage Payments
How to Lower Your Mortgage Payments
Making sure you have an affordable mortgage is vital for your security and stability. However, finding a mortgage you can sustain in the long run requires planning and some research.
It’s important that you look into all the mortgage options. There are a number of mortgage types and one or more may be options for you. It will help to analyze the interest rates for each type of mortgage . You don’t want to get into a situation where you have to sell your furniture to pay your mortgage!
As a REALTOR, I understand all the issues one can run into during the process of creating a Mortgage Plan, so I thought I would give you some tips on how to lower your mortgage payments.
The first tip is improving your credit score. If you currently have a low credit score, that will probably contribute to higher payments, but you can take some steps to improve it. First, you will want to go over your credit report and look for any problems or red flags. Next, stop applying for new credit and focus on reducing your current debt. By decreasing your debt over time, your debt to income ratio will decrease. Also, put all your efforts into making your payments on time.
Secondly, you can put more money down. The higher the down payment is the less money you will have to borrow, and, consequently, you will have lower monthly payments. Making a higher down payment can assist you in the pursuit of a lower interest rate and lowering your monthly payments too. A bigger down payment may also help you avoid paying costly PMI (Private Mortgage Insurance).
Another option is to make extra payments. Sometimes getting that money for the down payment can be difficult, but maybe you have enough to pay extra towards your principal every month. This will not affect your monthly mortgage payment right away, but it can help your principal decrease at a faster rate, which can allow you to pay off your loan faster.
Opting for a longer loan term is another alternative. A longer term will spread the cost over a longer period of time, therefore, lowering your monthly payments. This can lead to a loan with more interest, but it can make your dream of homeownership more affordable.
I talked about PMI earlier, which is a private mortgage insurance that you are required to pay for most conventional loans. This goes along with your monthly payments until you reach 80% of your loan-to-value (LTV). To avoid PMI, you will need to make a down payment equivalent to 20% of your home’s value.
If the money starts getting too tight, you can always rent out part of your home. If you don’t have a problem with sharing your space with a roommate, renting a room or even your basement can really help you reduce your overall monthly payment by having the rent income counterbalance your monthly costs. Check with your local municipality for any zoning related issues before pursuing this course of action.
Sometimes, it’s not even about lowering your payments, but simply paying off your loan faster, hence, paying less interest over the life of your loan. In order to do that, you can opt to make bi-weekly payments, which won’t lower your payments but will cut the life of your loan by approximately half.
Lastly, you have the option of buying down your rate. You need a low-interest rate in order to lower your monthly payment. However, you may not have the credit score necessary or another basis to qualify for a low-interest rate. To deal with this you can evaluate the option of buying discount points to get a lower rate and consequently lower your payments.
Don’t forget that when it comes to Real Estate, “Dan’s The Man”. Please let me know if I can help you with anything!
Fathom Realty, Chapin SC
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Dan Lang is a realtor/broker in Chapin, South Carolina. Dan retired after 29 years of service in the Marine Corps as a Lieutenant Colonel. He has personally moved more than a dozen times during his ca....
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