When it comes to expenses, for most people their mortgage is always the largest and most difficult to manage. Plenty of people would want to know how to lower those payments. But how can it be done, and how hard is it to do?
One method is refinancing to lower your payment. What this means is that you get a new mortgage with a lower interest rate as a replacement your current one. There are many variables that will affect your ability or desire in regards to refinancing, including the age of your current mortgage and the current interest rates. In most cases, for loans that are closed within 4-5 months, a lender won’t approve a refinance of they will have further rules for qualifications. Loans that are still at a point in the repayment schedule where the large majority of payments are for the interest may qualify under certain cases, or at least be worth looking at.
Before refinancing, consider the potential closing costs and other fees that may come with it, such as a prepayment penalty where a borrower may pay a penalty for paying off the mortgage inside of a specific timeframe. Also there should be a significant difference in the interest rates to compensate for those costs, 0.5-1.0% at least.
Private Mortgage Insurance is what a borrower pays when they make a down payment that is 20% or less on a mortgage from commercial lenders. The main reason for this is because these borrowers are said to be “riskier” than those that are able to afford a higher down payment. The cost of a PMI is based on the financial background (income, credit score, etc) of the borrower. However, they can request the PMI be removed upon paying down the mortgage until they own 20% equity in their home.
Of course, having a roommate is also an option, especially if you have the room for it. It may feel uncomfortable or inconvenient, but they can supply extra funds that might balance out your own monthly expenses.
The process of mortgage recasting can be used to reduce future payments. It works by making a larger payment directly onto the principal. This payment is usually required to be at or over a certain amount. The remaining balance is then used to calculate the interest and further payments. While the term remains the same, the payments and interest are reduced.