Top 5 Ways to Lower Your Mortgage Payment
Tann, a frequent contributor to consumer finance publications, suggests the top five ways you may be able to lower your monthly payment:
• Improve your credit score – The better your credit score, the better mortgage rate you can get. Don’t be sloppy about paying your bills. Pay them all on time every month. Pay credit card bills off in full each month. If you are carrying balances, work diligently to pay them off in full – or at least lower your debt by 50 percent. Once you improve your overall score, you may be ready to apply for – and get – a lower rate of interest on your mortgage.
• Get rid of PMI – If you did not put at least 20 percent down when you bought your home, you probably took on private mortgage insurance (PMI), which protects the lender in the event you default on the loan. Mortgages signed after July 29, 1999 are automatically cancelled once you reach 22 percent equity in the home. If you signed on for PMI before that date, you can cancel it when you have 20 percent equity. The catch is you have to request that it be dropped. If the shoe fits, call your lender.
• Take advantage of refi rates – Interest rates today are at historic lows. If you currently have a rate of five to six percent or higher, and plan to stay in your home for a while, now may be the best time to lower your monthly payment by refinancing your loan at low- or even no-cost.
• Shop around – A mortgage is a product. Shopping, comparing and negotiating with lenders to get the best terms possible can save you many thousands of dollars. Get referrals from people you trust and shop around for the best available deal.
• Take a shorter term – A fifteen-year mortgage will carry a lower rate than a 30-year mortgage – often as much as half a percent lower. Of course, you will be paying a higher monthly amount on the short-term loan. But if you can afford to pay the higher monthly amount, you will pay your loan off sooner and may save hundreds of thousands of dollars in interest over time.
By Barbara Pronin, RISMedia Columnist
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