Brainstorming ways to save on your mortgage payment each month is probably the least exciting way to pass the time. But if you do it right (that is, if you come up with ways to save that actually work), youíll be glad you put in the extra effort. In lieu of coming up with more money out of thin air, there are strategies that reduce your payment without hitting your pocketbook. Youíll need a little financial prowess, of course, but you can start with these five tips.
- Make an extra payment once a year. April is known as tax time, but it could also be an opportunity for you to get ahead on your mortgage. Most people make a plan for what they will do with the extra money if they get a tax refund after filing, so why not take a big bite out of the balance still left on your mortgage? If you do this faithfully every year, you could own your home several years sooner than you think.
- Consider refinancing. If you signed on to your mortgage when interest rates were higher than they are now, refinancing could be a useful tool for saving money on your monthly payments. If you can lock in a lower interest rate, you can effectively shave money off of what you owe to your lender each month, but this only works if you plan on staying in your home for a while. This is because closing costs can equal up to $5,000, so you should factor this into any overall savings that you might be gaining. To figure out how much you could save using this tactic, use a mortgage calculator.
- Get a reassessment for the value of your home. This wonít lower your mortgage directly, but it will provide you with extra money to put toward your house payment or any other household bills that you have. If you feel that your home has dropped in value, yet you are still paying property taxes based on its previous value, you could be overpaying by hundreds (if not thousands) of dollars each tax year.
- Switch to semi-monthly payments. Even if you canít afford to make one lump sum extra payment each year, thereís still a way to use this method. Instead of paying once a month, pay half of your monthly payment every two weeks. You can either arrange this with a third party, or you can simply create a savings account to hold your first payment each month until itís all due to save on escrow. Either way, you will make a total of 26 half payments, which amount to 13 full payments, each year.
- Recast your mortgage. One of the lesser-known services that lenders offer is called recasting, which is essentially re-calculating your mortgage payment based on a lower principal. To be clear, youíll still have the same interest rate and loan term, but youíll be paying less each month because your principal is less.
If you find yourself stretching your budget to its limit, ditching the lattes once a week is likely to not put a dent in your expenses. But these mortgage tips can help you balance your household budget in no time.
Matt Morgan blogs at www.thebookofmatter.com where he 'rumbles' about topics that interest him.
Share your thoughts about this article with the editor: Click Here