Today is a new day. You’re a homeowner with a mortgage, and you’re ready to rule the day. Wait, your monthly mortgage payments have your pockets a little stressed. Do not let this discourage you and certainly do not feel bad for housing those dreadful wallet moths, finances run short sometimes, but you have options when it comes to your monthly mortgage payments.
No one enjoys paying out an arm and a leg to pay for a house. This is particularly so when it comes time for your monthly mortgage payments. It can be extremely damaging and can put a huge strain on your finances throughout the years.
We mentioned them, and we are almost ready to introduce some options that can help to soften the blow when dealing with the payments on a home. As a homeowner, it is important that you know about these tricks, as they can help you save money as well.
However, these options and opportunities are not always the best course of action. As such, always ask an experienced advisor if these are the right way to go. They will be able to identify the proper method that should be used, as well as instruct you on how to start the processes available to you.
Refinancing is one of the major options available to you as a homeowner. Refinancing is simply the act of discussing and determining if you are qualified and able to get a new loan. This does not mean that it is only used for that purpose, but it is the primary reason.
When refinancing is done, you will generally want to look at a loan that has a lower interest rate than your previous one. This cannot be accomplished simply by attempting negotiations, though. Instead, you will generally have to look at extending the loan term, as that will increase the lender’s investment.
Refinances are generally only good at the start of a loan, though. The reason for this is that, during a home loan, you will generally be paying interest at the beginning, and then mostly the principal at the end.
Because of this, the rate of interest will have much less impact on your loan later on. For this reason, only think of refinancing if you are within the first or second quarter of your loan term.
We touched briefly on this method in the above section, but it is worth talking about how a longer loan term can help both you and the lender as well, making it seem like an ideal situation. A loan term is the length of time that you will be paying the mortgage on the home. Loan terms can range from years to decades.
When attempting to discuss loan terms, many homeowners may attempt to go for a shorter loan term, such as maybe only ten years if they are feeling good about their income. But, if you run into unexpected problems that cut into your savings, it may be best to look into finding another way to lessen the burden.
In comes extended loan terms. If a loan term is extended, that usually means a lower rate, as the lender would be more accepting of the lowered payment plan, since you would be paying a bit more over time.
The downside is making sure that you factor into account how much you will be paying overall in the long run. When extending your loan term, if you exceed a certain time frame, you will end up paying more than the home is worth, which will saddle you with an underwater mortgage instead.
This option is not as well known to homeowners but can be an important reason as to why your mortgage payment is so high. The PMI, or Private Mortgage Insurance, is a portion of your regular mortgage payment each cycle. This will be active as long as you were to pay less than 20 percent of the house at the time of the down payment.
There is a simple way to get this payment portion removed. First, If you can pay the mortgage payments, and end up repaying more than 20 percent of the total equity on your house, then you would be entitled to possibly having the PMI payments removed.
Next would be to contact your lender, or whoever you borrowed the money from to put the down payment on the house originally. There is a simple reason that they will not do it automatically: They want you to keep paying it. As such, you must contact them directly and ask to have it removed.
Sometimes they will be readily available to do this. Other times, the lender may send an appraiser to value your house and make sure that the equity value of the home is correct. Either way, if you are approved, you will notice that your mortgage payment amount is lower the next billing cycle.
Instead of letting your credit tank after a foreclosure due to not being able to pay, renting out a portion of your house can help to reduce how much you will have to pay as an individual. The difference, when compared to the above ways, is that this is not done directly affecting the mortgage itself.
Instead, this is the same as if you were to increase your income by a certain percentage suddenly. Renting out a bedroom, or even a full section of the house means that you will be able to collect rent from the tenant living there.
This rent can then be added to your mortgage payments, which would mean that you, as the homeowner, would pay less on the mortgage.
There are a few risks that are associated with this method. First off, it means that you would need to find someone that is trusted. Second, they would need to have a clean background, as you do not want to have to deal with any unexpected situations that may arise. These two points can make the candidate pool quite limited.
If you do plan to rent out a portion of your home, we recommend that you find a trusted friend to rent it out to, or do a complete background check on any potential renters. This way, you lower the risk on yourself of having additional, unexpected charges for possible breaks or problematic situations.
Still, have questions on about your mortgage payments? Falling behind on your monthly mortgage payments and need expert advice? Take a moment and fill out the short form to the left to learn more about mortgages, foreclosures, as well as buying and selling your house before you go belly-up!