When it comes to your mortgage payment, not everything about it is set in stone. For most families, the mortgage payment is the single largest household expense they have, and saving money on the mortgage payment can mean having a little extra disposable income each month. If savings is the name of the game, here are five strategies you can use to slash your mortgage payment.
Refinancing your mortgage to a lower rate makes sense. If your mortgage is at a six percent rate and you refinance to a 15-year loan at a four percent rate, you can pocket a few hundred dollars each month.
However, in order to refinance, it is important that you have good credit, and be in good standing with your mortgage company. Homeowners having difficulty making payments may want to consider speaking to a housing counselor for the Home Affordable program for a loan modification, another way to reduce high interest rate costs in the short and long term.
2. Pay bi-weekly
Making bi-weekly payments is equivalent to making an additional mortgage payment each year. This cuts a 30-year mortgage down to 21-years, and will save thousands of dollars in interest charges. The average homeowner pays over four times the contract purchase price over the lifespan of a loan, so cutting that down (nearly by a third) is a smart way to save.
3. Claim your homestead exemption
FHA, VA and most conventional loans require that property taxes and homeowner’s insurance be escrowed in to a mortgage payment. Thus, lowering property taxes makes an impact on your mortgage payment. If you are living in your home, you can claim a homestead exemption, lowering your property taxes and your mortgage payment. You must file the exemption annually, at your local tax assessor’s office, but savings can add up to thousands of dollars in a single year. In addition, disabled veterans and senior citizens can apply for more exemptions to a property tax bill, saving even more.
4. Eliminate PMI
If you were not able to come to the table with 20 percent down on your home at closing, chances are you are paying private mortgage insurance (PMI). This fee adds up to thousands of dollars over the lifespan of a loan. However, you can have it eliminated once you can show that you have at least 20 percent equity in your home. In order to do this, you will need to hire an appraiser (a cost averaging $300 – $500) to submit a report to your bank. While the process can be time consuming, the savings to you is worth it.
5. Challenge your property tax assessment
Each year, your tax office assesses the value of your property based on market conditions. Using an appraisal or a comparative market analysis provided by a real estate agent can be the fodder in your cannon showing that the tax assessor’s office is valuing your property to high, and just as with a homestead exemption, this can slash your tax bill and save you money on your mortgage payment. Similar to an exemption, the property tax challenges must be done annually, between the months of October to December in most areas.