Lowering mortgage payments can be a good way to increase available funds and reduce monthly debt load. There are several different ways to achieve a lower mortgage payment, but not all options may be available on certain loans or with particular lenders. Consider the options carefully before deciding to take further steps; while a lower mortgage payment can provide short-term benefits, they may not always be worth long-term costs.
In the lucky event that a person has been able to put away money or has inherited a sizable sum, mortgage payments can usually be lowered by adding to the down payment on the house, or paying off the house loan entirely. This action immediately reduces the total debt of the mortgage, which in turn will reduce payments. Discuss this option with lenders before making a large down payment, as some loan structures charge fees for extra payments or for early repayment of a debt. Even with fees, however, this may still be a money-saving option, as the sooner the debt is repaid on the house, the less money is lost to interest fees. Sit down with a calculator and work out the cost-versus-benefits analysis before proceeding with this scheme.
When interest rates drop, refinancing can be a good way to get a lower mortgage payment. This method allows the borrower to adjust the mortgage in order to account for a reduced interest rate, which can make monthly payments drop significantly. Refinancing usually involves closing or points fees charged by the lender, so this is also a good place to have a calculator handy. If a person must pay a $3,000 US Dollars (USD) closing fee on the refinanced mortgage, but will save $300 USD per month in mortgage payments, it will take ten months for the savings to balance out the fees. If a person plans to move before the savings match the fees, refinancing may not be worth the effort.
One other way to to achieve a lower mortgage payment is to alter the structure of the mortgage. This strategy takes careful consideration, as it can actually end up costing more in the end. Instead of altering the interest rate, as in a refinance, a mortgage adjustment usually extends the repayment terms of the loan. This means that a loan scheduled to be paid off in ten years might be extended to 25 years, which would typically result in a significantly lower mortgage payment. On the other hand, the longer the term of the loan, the more interest is paid over time, leading to a higher total repayment. Adjusting the mortgage terms is usually a good idea if payments are becoming unmanageable and foreclosure begins to loom on the horizon.