For most Americans, their home is their single most valuable possession. Likewise, the loan they took out to pay for their home is their largest monthly expense. There are many factors that go into determining the monthly payment on a mortgage. The purchase price of the home, property taxes, the amount of the initial down payment, and the cost of insurance all factor into the monthly payment.
While it is too late to go back in time and negotiate a better price for your home, there are four simple things homeowners can do to lower the cost of their monthly payment or shrink the amount of years until the mortgage is paid off.
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Make Bi-Weekly Payments
Everyone knows that they have to pay their mortgage once a month, right? Wrong. Most loans allow the borrower to pay their mortgage once every two weeks. While a once a month payment equals 12 full payments per year, a bi-weekly payment schedule yields 26 half payments, or 13 full payments per year. That extra payment can be applied directly to the principal amount of the loan, thus reducing the total amount of interest paid and shortening the length of the loan.
Refinance Your Existing Mortgage
Refinancing your existing loan has the potential to save you $$$ each month. If you are current on your payments and have a good credit score, you may qualify for a lower interest rate. While refinancing can save you money in the long run, make sure you do your homework before deciding to refinance. Refinancing is not free, and if your credit score isn’t going to qualify you for a lower rate then you might end up paying more in the long run for your loan.
Request A Tax Reassessment
The value of your home goes up and down over time (even though real estate appreciates in the long run). If you feel that the value of your home has decreased in value, you can request a reassessment. Homes that are reassessed for a lower value can expect to pay less each month in property taxes.
Stop Paying PMI
If you purchased your home with less than a 20% down payment you have to pay private mortgage insurance (PMI). Lenders automatically stop collecting PMI when the loan balance reaches 78% of the original purchase price of the home, but you can request to cancel PMI when the home reaches 80% of the original purchase price. You may also be able to cancel PMI if your home has appreciated in value and the current loan to value ratio is 80% or less. Contact your lender regarding information and requirements for canceling PMI.