Like many homeowners, you may have come to dread paying your home mortgage every month. This expense is often the largest and managing it can become difficult in times of financial distress. Before you find yourself in a situation in which your mortgage payments become difficult to pay, consider working towards these steps in trimming your mortgage costs:
Eliminate Your PMI
Your PMI, or private mortgage insurance, is a payment that you must make every month if your original down payment was less than 20% of the total cost of the home. Fortunately, your lender may be able to cancel this insurance once your mortgage balance falls below 80% of the total cost. Eliminating your PMI will equate to a sizeable reduction in your monthly mortgage payment.
Make an Extra Payment Every Year
When putting away money into your savings account, consider putting 1/12 of a mortgage payment away each month. At the end of the year, make an extra payment. This can be one of the most effective ways of saving money on your home mortgage, as it allows you to reduce both the number of years that you’ll be making a payment and the amount of interest that you’ll be paying overall.
Recast Your Mortgage
This little known method of saving money on your home is recasting the mortgage. Recasting your mortgage involves paying a large lump sum towards the principle, then asking for your monthly payments to be reorganized using the new remaining balance. Not only will this reduce the life of your loan, but it will also save you money on your mortgage costs in interest in the long run. This is especially useful for people seeking to refinance their home, but are unable to due to tough credit guidelines.
Refinance Your Mortgage
For those that are able to obtain one, a mortgage refinance can lower the interest rate of their home for the remaining life of the loan. Unfortunately, it can take some time before you are prepared to refinance. First, make sure that you current credit score is higher than it was when you obtained your original mortgage. Additionally, have some savings put away, as there are often fees associated with the process.
As with many things in life, it sometimes takes money to make money. Spending a little time and cash improving your credit and paying off the principle of your mortgage can lead to more savings in the future.