Dealing with a high mortgage payment can be very taxing. If you sit there and wish your mortgage cost you less each month, but don’t want to refinance, you have options. It requires you to think outside of the box, but these tips will help you pay less for your mortgage each month.
Ask for an Extended Term to Get a Lower Payment
You don’t have to refinance in order to obtain an extended term. Lenders call this recasting your loan. You don’t have to pay closing costs or go through a lot of underwriting. Your lender will have to approve your request, but it’s usually easier to get qualified for this than a refinance.
It will cost you a few hundred dollars, but it will give you the lower payment that you desire. By taking a lower payment and extending the term, you may be able to better afford the loan. You should know that with this option, you will pay more interest over the life of the loan since you stretch out the term. If you are able to qualify for a refinance in the future, it may make sense to do so. Many people use the re-casting as a temporary solution to get a lower payment to get through tough financial times.
Ask for an Assessment of Your Property Taxes
If your lender pays your taxes and insurance, you have an escrow account with them. This increases the amount of your mortgage payment each month. The lender decides how much you should pay each month based on the annual cost of your real estate taxes and homeowner’s insurance. Lenders charge you 1/12th of this amount plus a small cushion, in some cases, to ensure that you have enough money to cover the cost of the taxes.
If you don’t agree with your tax assessment, you can contest it with the county. This is a formal process and each county has their own procedures. Find out from your county how you ask for the reassessment and/or how you fight your taxes if you feel as if you are unfairly charged.
The reassessment should not cost you anything because it’s not an appraisal. If you have to hire a lawyer to fight your taxes for you, though, this will obviously cost you money.
If you pay PMI, this also increases your mortgage payment. Lenders are required to cancel your PMI when you owe less than 78% of the home’s original value, but don’t wait that long. Have you checked on your home’s value lately? Has it appreciated? If so, you may have a lower LTV than you think.
Talk to your lender about the option to pay for a new appraisal to reflect the home’s higher value. Some lenders only use the home’s original value when determining if you can cancel your PMI. If your lender will allow the new appraisal, though, you can pay around $500 to have the PMI removed from your loan for good if you owe less than 80% of the new value.
Rent Out Your Home
Do you have a part of your home that you don’t regularly use? If you rent it out, you can use the money collected for rent to help you pay your mortgage payment. This isn’t a permanent option since leases are usually on an annual basis, but it can help you get help while you need it. Even if you can comfortably afford your mortgage payment, you can use the rental income to pay extra towards your mortgage. This lowers your total principal balance, which lowers how much interest you pay over the life of the loan.
You have several options to lower your mortgage payment, several of which don’t cost you a dime. Consider all of your options when deciding how to make your mortgage cost less each month before jumping straight to a refinance. Refinancing does work for many borrowers, though, especially if they can grab a lower interest rate, as this will cost them less over the life of the loan.
Weigh your options and decide which one works the best for you!