One of the real stressors for most potential home owners is the process of researching, applying for, comparing and qualifying for a home loan. On the one hand, we’re ecstatic once we get that loan. On the other, we’re deer-in-the-headlights petrified that we’re now locked into that home loan and monthly mortgage payment for the rest of our lives.
Not so. A mortgage payment is not a one and done, nor is it a forever and a day scenario. It is possible to reduce the monthly/yearly mortgage payments on your home for as much as $20,000. or more over the life of your loan instrument. Here are some tips as to how to make that happen for yourself.
- Stop paying the Private Mortgage Insurance (PMI) on the loan. The PMI is required if your down payment was less that 20% of the price of the home when you bought it. Simply refinance the mortgage. With the escalation of home prices nationally, it’s likely to find that a new home appraisal will reset your equity above the 20% requirement.
- Switch to a 15 year mortgage from a 30 year. A 15 year mortgage will likely have a fixed interest rate definition just as the 30 year mortgage loan package does over the term but the 15 year mortgage will have a lower rate. Since you pay off the loan in half the time with a 15 year package, you will be charged far less in your total interest costs. For example, a $200,000. 30 year mortgage loan to a $200,000. 15 year mortgage loan would save an average of +$92,000. over the life of the loan at the current interest rates.
- Shop around for competitive bids from banks on home loan mortgages. Many people think they have to stick with the same bank who gave them their loan, but they don’t have to! You may surprise yourself when you find a better deal somewhere else!
- Set up bi-weekly payments. With 52 weeks in a year and 26 bi-weekly payments equaling 13 full payments a year as opposed to 12, that one extra payment per year on a $150,000. mortgage adds up to a +$15,000. reduction in interest payments over the life of the loan.
- Work to reduce the assessment on your home. According to the National Taxpayers Union, 30-60% of homes are “over assessed” every year. Yearly, your home assessment notice likely comes to you. Check the back of that notice for instructions on how to appeal that assessment (each state has its own process). Check out the sales prices of 5-10 comparable homes in you neighborhood that have sold within the last six months. Document those prices and send them along with your appeal. The appeal period usually runs for 2-6 weeks.
- If you’re a veteran, apply for a VA loan. (This is a clear no-brainer!) Conventional loans can be refinanced as VA loans. VA loans do not require a down payment, a mortgage, a minimum credit score and they have lower interest rates.