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How to Lower the Monthly Payments on Your Mortgage

Mar 10, 2008
Most of us couldn't even think about buying our homes if we were unable to get a mortgage. For all their faults; the high interest rates, the large down payments needed and the oppressive monthly payment that constantly hangs over our heads, we have to be thankful that we have a mortgage. If we were unable to finance our homes we would be unable to build equity and live a life landlord free.

Still, every one of us would like to find a way to lower our monthly payment on our mortgages. If we could just shave $100 or so off our monthly payments, it could make a big difference in our day-to-day finances.

In this article will discuss some common ways and some often un-thought of ways a person can use to save that extra hundred dollars monthly and put it to good use.

Refinance

Of course, it is only logical if we were to pay a lower interest rate we would be paying a lower monthly payment. Right now the time is right for anyone who's had a mortgage for more than a couple of years to refinance and probably end up with a substantially lower monthly mortgage payment.

For anyone who has a mortgage with an interest rate of 6-1/2% or more, it is possible under the right set of circumstances, to end up with an interest rate substantially lower. This could make a dramatic difference in a mortgage's monthly payment. For instance, if someone had a mortgage of $200,000 on a thirty-year term at an interest rate of 6.75%, his monthly payment would be $1,297. However, if he refinance at 5%, the monthly payment would go down to $1,074!

When someone refinances, usually he will borrow more money than his did on his original mortgage, if for no other reason just pay the closing costs. Still, at this time in our history when we are able to get a much lower interest rate, it would have to be worth paying the closing costs to lower the monthly payment by a large amount.

Pay homeowner's insurance upfront

There are other ways to lower your monthly mortgage payment without even considering what is being paid on the principal and interest. Here's what I mean. Mortgage companies start an escrow account for the borrower and they take money from him monthly to pay the homeowner's insurance and taxes. If somebody wanted to he could pay the homeowner's insurance upfront and not have to make the payment monthly.

If the homeowner's insurance was $600, a person has the option to pay the bill instead of sending it to the mortgage company. The mortgage company should logically charge $50 a month and pay the $600 by the end of the year. However, escrow accounts seem to be more complicated than that. Often we pay an extra $20 to $30 a month just because that's the way lenders are. Eventually we get the money back, but why wait? Pay the homeowner's insurance upfront and it will undeniably lower the monthly payment on the mortgage.

Fight property tax increases

It seems that every year property taxes go up. To many of us take these tax increases sitting down. If your intent upon lowering your monthly mortgage payment, you may want to negotiate your taxes. When your taxes go up, you should go to City Hall and tell them about all the many circumstances surrounding year property and your situation that makes a tax increase impractical.

Many times you'll win this argument because people who work in tax assessor's offices often don't want to work too hard. If you are relentless, you'll probably get that tax increase lowered, and this in turn will lower your monthly mortgage payment.

Pay on time!

Finally, while this doesn't actually lower your monthly payment, it is excellent advice for a large number of people. Many people make their mortgage payment after their grace period has expired. When they do so, they are be paying an extra 50 to who knows how much dollars in late fees. No matter what it takes you should get yourself on a cycle where you're paying your mortgage payments on time so as to avoid paying late fees.

No matter how you lower your monthly mortgage payment, it is a great move because you'll free up more money to pay off your high interest rate debt if you have any. High interest rate debt is a financial killer and any way you can save money to pay off this killer will come back to help your finances tenfold.

So there you have some food for thought on ways to lower your monthly mortgage payment. It's often only small adjustments that can go a long way toward getting ahead financially, if you can avoid using this extra amount of money to buy more stuff. However, if you save money on your payments and make no negative adjustments to your lifestyle, you'll end up living below your means and this is a great first step toward financial freedom.
About the Author
Ed Lathrop is a successful real estate investor. He has developed EzCalculator, a mortgage calculator that lets you calculate anything that has to do with a mortgage! Come visit this free site at: free financial calculator. Also, find out how to get and use your amortization table to save a lot of money at: amortization schedules free. These sites are not owned by any lender.
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