Everyone is looking for ways to maximize their savings, and people paying for their mortgages are no different. A lot of mortgage payers spend a huge chunk of their income on the mortgage payment, leaving them with just enough money to get through the month and little to no savings.
Your mortgage costs should not exceed 30% of your monthly income. The question then is, “how do you lower your monthly mortgage payment”?.
As they say, there is more than one way to peel a potato. So, here are 4 ways to cut monthly mortgage to size. Before applying for a mortgage loan, you should consider the following points for a more informed and balanced decision.
1. Extend The Term
They also call it recasting. You do not recast the mortgage amount. You spread repayment over a longer period, what is also called extending the loan payment term – from 15 years to 30 years months. Mortgage payment per month will be lower automatically. There wouldn’t be any need to refinance the mortgage. A small fee could be charged.
However, the monthly mortgage repayment will decrease substantially, giving you more time to repay the entire amount. Borrowers with an immediate need for cash will sing praise. You can take the help of a mortgage loan calculator available on your lender’s website for a quick and clear perspective.
2. Refinance For A Longer Term
A second way to cut monthly mortgage payments is by refinancing the mortgage. You can choose a longer term for the loan through refinancing. This move also cuts interest rates as also the monthly payment. But you must have a good credit rating. Refinancing helps save money. A low-interest rate encourages bigger savings. A 1 percent cut could mean a lot over, say, 30 years. Go for refinancing only with a bank that keeps the interest rate low. Find the best rate.
3. Pay A Higher Down Payment
A third way to keep monthly mortgage payments low is to make a large down payment on the purchase price for your home, say 20 percent. If the down payment is higher, the monthly mortgage payment will be less. When paying a higher down payment, you may not have to Private Mortgage Insurance (PMI), which is another saving coming your way! Less than 20 percent down payment, and you may have to pay mortgage insurance also, which means a bigger drain from your pocket.
4. Know What You Can Afford
Taking a mortgage loan and buying an expensive house is tempting but not wise. Your real estate agent might tell you that a bigger house is only $10,000 more, so it is worth your consideration. But instead of going for a higher-priced home, if you choose a lower-priced dwelling that serves your purpose might be a wiser decision. And, this will certainly bring down your monthly mortgage payment.
Taking a mortgage loan should be a well-planned decision. Before you apply for a mortgage loan, you should use the mortgage loan calculator to work out the EMI that you will have to pay. Here, you will tie yourself down with a monthly payment for a long period. You may find monthly mortgage payments difficult if you don’t think and plan.