How to lower your monthly house payment
Your monthly mortgage payment, which includes the loan’s principal, interest, property taxes and homeowners insurance, no doubt takes a large chunk of your take-home pay. Most homeowners just live with the pain, despite some concrete steps they can take to lower the payment.
It’s not easy, and it does require effort on your part. But, you can lower your monthly house payment.
Dump the high interest rate, lower your monthly house payment
Although mortgage interest rates have been at historic lows, many homeowners bought their homes during periods of high interest rates. And, yes, rates are rising, so you’ll need to take advantage of this tip soon.
By refinancing the home with a mortgage that carries a lower interest rate, your monthly payments will naturally go down. For instance, if you bought your home in 2003, you are most likely paying 5.83 percent in interest.
Lock in today’s rates, 4.625 percent as of this writing, and your house payment will be reduced significantly.
There are aspects of refinancing that need to be considered before jumping into it so run the idea by your accountant or financial planner first.
Lower your property taxes, lower your monthly house payment
Depending on where you live, paying your “fair share” to help fund our schools and local government can add a hefty amount to your monthly house payment. In fact, according to the Census Bureau, the average American homeowner pays $2,197 in property taxes every year.
This adds more than $183 to your house payment each month. If you live in a high-tax state, such as Illinois or New Jersey, you may pay close to twice that amount.
Your first step to lower property taxes is to dig out your current assessment and check to ensure that everything in it is accurate, from the home’s square footage to the number of bedrooms and bathrooms. If you do find errors, or if you know of homes in your area that are more expensive yet the homeowners pay less in taxes, you may be able to dispute your tax bill.
Most county assessor’s offices have procedures to file disputes. If you succeed you will definitely lower your monthly house payment by lowering the amount of escrow paid to your lender each month. Also, if you succeed, then be sure to contact your lender and advise them of the lowered tax amount.
Are you paying too much for homeowners insurance?
The average American homeowner pays about $1,083 each year (a bit less than $100 per month) for homeowners insurance, according to ValuePenguin.com.
And, many may be paying too much, according to a Consumer Reports study. Among respondents to the survey, “About 9 percent switched insurers in the previous three years, and more than half reported finding a better price,” according to Jeff Blyskal at consumerreports.org.
He goes on to claim that homeowners “can save hundreds to more than $1,000 per year in premiums by shopping around.”
Insurance companies use your credit score when determining your premium, so work on raising your score to get better rates.
Blyskal explains that “an insurance premium for a 45-year-old homeowner with a fair credit score would be 36 percent higher than if she had an excellent score, on average nationally. If the homeowner had a poor score instead of an excellent one, her premium would be 114 percent higher.”
Get rid of PMI, lower your monthly house payment
Private mortgage insurance (PMI) or the Mortgage Insurance Premium (MIP) if you have an FHA loan, is both a blessing and a curse. It’s a blessing because it helps Americans who might not otherwise be given a mortgage to finally become homeowners.
The flipside, however, is that the premiums are tacked onto the house payment every month. With a conventional loan, PMI is removed when the homeowner obtains 20 percent equity in the home.
FHA’s MIP, however, remains for the life of the loan. But, if you’ve hit that magical 20 percent equity mark (and 80 percent loan-to-value), refinance into a conventional mortgage and do away with the MIP payment every month.
If you believe that your home has increased in value and/or you’ve paid down the principle enough so that you now have at least 20 percent equity, then the next step is to hire and experienced, licensed property appraiser to appraise the home. If it appraises well and you’ve hit the 20 percent mark, then contact your lender about removing PMI. Removing PMI can lower your monthly house payment significantly.
How to lower your monthly house payment
About the author:
Oscar is a practicing, Florida attorney, Realtor, and Florida Supreme Court Certified Mediator. He began working in real estate as a Realtor in 1994 and later went on to become a real estate attorney in 2002. From 2002-2005 Oscar was the sales director for Ballast Point homes LLC. During his tenure with Ballast Point Homes, he managed a sales team that produced over 55 million dollars in condominium and townhome sales. With over twenty years of experience, Oscar represents buyers, sellers, business owners, other Realtors, and Brokers with professional, personalized service. In addition to residential sales, as an attorney, Oscar has written and negotiated many commercial and residential contracts and leases. He currently represents several local businesses including two restaurant chains but, prefers to focus on residential and income property sales in St. Petersburg and the beaches.
A native of St. Petersburg, Florida and a second generation Gator, he received a B.A. from the University of Florida and a J.D. from Stetson University’s College of Law. He is currently an MA candidate at American University’s School of International Service with a focus on International conflict and dispute resolution. Oscar is US Army veteran and former Judge Advocate. As a captain in the Army JAG Corps, he served in the 3rd Infantry Division and then as Chief of Client Services, Schweinfurt, Germany and Chief of Criminal Justice for the 200th MP Command, Ft. Meade, Maryland. He is a certified VA attorney representative and an active member of VARep, an organization of real estate professionals dedicated to representing and education veterans. Oscar focuses his passion for real estate on providing exceptional client services. He lives in St. Petersburg with his wife and twin daughters. Oscar and his wife, Melissa, own and manage vacation rental properties in Pinellas and Manatee County, Florida.
Thank you for reading my article, How to lower your monthly house payment. Feel free to contact me if you have any questions.
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