When you are trying to manage your monthly budget, it is important that you find places to make cutbacks. But if you cut out small luxuries, you will not make much of a difference.
However, if you can find ways to reduce large monthly payments, like your mortgage, it is far easier to manage your finances. Unfortunately, a lot of people do not realize that there are ways to reduce your monthly mortgage payments, and they end up paying far more upfront than they need to. If you would like to reduce your mortgage payments, these are the best ways to do it:
Offer a Bigger Down Payment
The easiest way to reduce mortgage payments is to increase your down payment when you first buy a property. If you have a much smaller mortgage in the first place, your monthly payments will be much lower and you will be able to pay off your mortgage in a shorter period of time.
A smaller down payment leaves you having to pay both more in interest and more in monthly payments than if you put down a big chunk of the mortgage upfront. It is worth considering this when you are in the process of buying a house. Could you potentially hold off for a year and save up some more money? This will benefit you in the long term so do not rush into a purchase with a small down payment.
Re-Cast Your Payment Term
If you find yourself in financial difficulty and you need to decrease your mortgage payment right away, re-casting your payment term is the most effective way to do that.
It will cost $250 to extend the payment term and you will pay more overall interest so your mortgage will be more expensive. However, increasing the payment term from 15 to 30 years, for example, will reduce your monthly payments on the mortgage so you don’t have as many immediate costs. It is a good short term strategy if you need to relieve the financial burden right away.
Refinance Your Mortgage
High mortgage payments are often the result of a high interest rate. If you had poor credit when you took out the initial loan, you will be likely to have a high interest rate on your mortgage.
But if your financial position has improved since then, you should consider trying to refinance your mortgage. As long as you have a good credit rating, you may be able to find a better mortgage deal with a lower interest rate, and this will significantly lower your monthly mortgage payments. However, this strategy only works if your finances are in good shape, because a low credit rating will make it difficult to find a mortgage with a low interest rate.
Re-Do Your Tax Assessment
If your home loan has an escrow, your property taxes are added to your monthly mortgage payments, and that will increase your monthly financial burden. However, you may be able to reduce those monthly payments if you re-do your tax assessment.
If you are trying to work out how to lower your mortgage payment, it is important that you don’t overlook this strategy. By re-doing your tax assessment, you may be able to lower your property taxes and immediately reduce your monthly payments without impacting your overall mortgage payment.
Rent Out Part of Your Home
If you have extra space in your home and you are wondering how to reduce your mortgage payments, you could rent out some of that space and earn income each month to go toward your mortgage. This is a great strategy for families who have more space than they use and wish to reduce their mortgage payment—or even just earn a little extra cash—each month.
If you contact a property management company, they will be able to help you find suitable tenants and collect rent for you if you opt to rent out part of your home or another property. This extra income that you generate can go toward the mortgage and take the financial pressure off you.
If you don’t know how to reduce your mortgage payments and you are in financial difficulty, you should explore some of these options. Renting out part of your home is the best way to generate passive income if it suits your lifestyle, and you can combine it with some of these other strategies.