Whether you have an adjustable rate mortgage or a fixed mortgage, you may see your monthly mortgage payment fluctuate from time to time. Adjustable rate mortgages have the most frequent and dramatic changes since they are recalibrated according to changing interest rates. A fixed rate mortgage typically changes when there is a shortfall in the escrow allocated for property taxes and homeowner's insurance. If a recent change in your mortgage payment is putting a strain on your budget, there are a few strategies that you can use to lower your mortgage payment.
Challenge Your Property Tax Assessment:
It is always a good idea to periodically check with your county tax assessor to make sure that your property is assessed correctly. A mistake in calculating the square footage of your home or in the number of bedrooms can have you paying hundreds of dollars extra per year in property taxes. If there is an error, your county assessor's office can tell you the proper procedure for disputing your tax assessment. It is important to note that it may take several months for your new tax rate to be reflected in your mortgage payment.
Shop Around for New Homeowner's Insurance:
If you have your homeowner's insurance included with your mortgage payment, you may be able to save money by increasing your deductible or shopping around for a different insurance provider. Some insurance companies even offer preferred rates if you bundle your home and auto policies together. If you decide to increase your deductible, be sure that you choose one that you can still live with in the event that you have to make a claim.
Refinance Your Loan:
Refinancing your loan may be the fastest way to reduce your monthly mortgage payment.
- A lower interest loan reduces your monthly payment as well as the total amount that you will pay over the life of the loan. As a general rule, you should consider refinancing if you plan on being in your home for an extended time and your mortgage is one-half to five-eighths percent higher than the current interest rate.
- Depending on the amount of your down payment, you may be able to eliminate private mortgage insurance, which can reduce your payment even further.
- If you currently have an adjustable rate mortgage, you may be able to switch to a fixed rate mortgage, which will give you more payment stability.
- A refinance can give you the opportunity to tap into the equity that you have accrued, which can be used toward other expenses. This is referred to as a cash-out refinance.
- During your refinance, you also have the option of paying discount points to reduce your interest rate even further.
Things to Consider When Refinancing:
Refinancing does come with certain costs that must be considered. The break-even point is where the cost of refinancing equals the money that you will save with the new loan.
- There may be application, processing, and other loan origination fees.
- You should check with your current lender to determine if you will face a penalty for paying your current mortgage off early.
- You should take into account miscellaneous settlement charges, including appraisal fees, title search and insurance fees, and credit report fees.
It is important to remember that refinancing replaces your current loan with a new loan. If your new mortgage has the same loan term as your current loan, you could end up paying more in additional interest over the life of the loan than you will save in lower payments.
At Wyndham Capital, we offer a variety of home refinancing options. Our knowledgeable mortgage refinance experts can help you determine if refinancing makes sense for you and walk you through the process.
Call us today for more information.