Whether you're in a financial predicament or not, a high mortgage loan repayment amount can consume a massive portion of your income. And it might become tricky to cover other bills and financial obligations with what's left.
It's typically recommended that your mortgage repayments should not consume more than 30% of your total monthly income after taxes. If your mortgage costs are any higher, these mortgage repayment reduction tips might help you make ends meet each month more easily.
Extend The Repayment Term
The most straightforward way to minimize mortgage costs is to extend the repayment term. By extending the term, you'll be paying a smaller amount of money over a longer period of time.
Extending the repayment term may even allow you to purchase a second home. Moreover, having a second home offers a few financial benefits, so you might find yourself browsing Florida real estate listings shortly after freeing up more of your income with this simple approach.
You also have the option of refinancing your mortgage loan. Refinancing might promise you a lower interest rate, which can reduce your repayment amount significantly.
You will need to have good credit to refinance your mortgage loan and save. Current refinancing rates are down about 20%, so you'll stand to save substantially on lower interest by refinancing now. Refinancing is a money-savvy way to avoid high-interest rates.
Set Aside A Larger Down Payment
This solution is only plausible for those who have not yet purchased a home with a mortgage. While saving for your down payment, be a bit more patient and save more than the minimal 20% of the property's total value. In doing this, you'll need a smaller mortgage loan in the long run, which means more affordable repayments.
Cancel Your Private Mortgage Insurance Policy
While a lender might insist that you opt for private mortgage insurance when securing your loan, you can later opt-out of this policy. Avoiding this policy can save you a small fortune in the long run.
Alternatively, you can pay for the private mortgage insurance policy upfront, which might entitle you to discounts.
Federal Loan Modification Programs
There are a few federal loan modification programs available if you're a homeowner battling to make mortgage repayments due to financial distress. These programs can help reduce your repayments through your chosen lender. However, you'll need to meet specific criteria to be eligible for these programs.
In addition to the above, it's worthwhile to consider ways of reducing property insurance premiums. By lowering these premiums, you will also save each month substantially. Shopping around and comparing insurance deals is the best way to reduce your premiums while you can also increase your deductible and be sure to keep your claim number low. Moreover, maintaining a good credit score and keeping up with home maintenance are also effective ways to lower your property insurance premiums.
That said, if you're a senior, you can also consider the option of a reverse mortgage, which is a type of loan that pays you a lump sum or a monthly amount to the value of your home.