For most homeowners, your mortgage payments are one of your largest monthly payments you’ll have to make. However, is there a way to shorten the cost of this loan and how long it takes to pay it? Fortunately, we may have a few solutions for you. Below, are a few personal finance tips on handling your loan repayments, which won’t leave you with an empty wallet every month and take a huge toll on your tight budget.
1. Setup Automatic Bi-Weekly Payments
You can set up automatic bi-weekly payments with your bank to help pay off your loan earlier, which can help reduce your risk of paying late fees. Just make sure that you place at least half of your payment the account it’s being deducted from every payday. This way, your bank can deduct it and you won’t have to worry about having the right amount of money in your account.
2. Make an Extra Payment Every Year
Simply put, one of the easiest ways to stay on track with your loan payment and to lower the number of payments you’ll have to make on it. This is because your annual additional payments are deducted from your principal amount, which can help reduce your remaining balance. Not to mention, it also means that you won’t have to pay interest fees each month while you’re paying back the rest of the loan.
3. Get Your Loan Reset
Some, not all, lenders can reset your monthly loan payments if you make an unusually large payment on your loan. Although your monthly payments will remain the same, your loan term can get reduced. Also, when your loan is reset, your monthly payments and interest are recalculated, so your monthly principal and interest on your loan can shorten.
One of the most common ways to lower your monthly payments and make them more manageable is by refinancing. This is a great way to lower your interest rate and your total monthly payment. You should be aware, though, that refinancing can cost money. Before you start the refinancing process, make sure that you have enough cash saved up to cover these fees. No matter what your interest rate is right now, you may be able to find a lower rate. Be sure to do your research and consider refinancing.
5. Remove Your PMI
If you paid less than 20 percent for your down payment, you were most likely required to pay for a private mortgage insurance or PMI. Fortunately, you can ask your lender to cancel your PMI once your loan balance reaches lower than 80 percent of your home’s appraisal value. You can go through this process if you repaid a certain portion of your principal amount or if your home’s value increases.
6. Petition to Reduce Your Assessment
This is a great move for your personal finance. Property taxes can cost you hundreds to thousands of dollars every year. If you feel your property’s value has either decreased or hasn’t been rightfully accounted for in your tax assessment, you can petition to reduce your assessment and generally lower your taxes.
7. Make a Change
Some lenders allow their customers to modify their loan based on certain factors. If you have gone through a recent financial hardship or are late on your payments, you might be able to change your loan terms. They may allow you to change the interest rate, terms, or the principal balance in order to make the loan more affordable. These programs are designed to help homeowners to make their regular payments and continue living in their homes. Check with your lender to see if you qualify for one of these programs; not everyone will. However, if you do qualify for a program, you can save a bit of money every month.
8. Research Reverse Mortgages
If you are close to paying off your loan in full, you can begin looking at reverse mortgages. This program allows you to tap into your home’s equity in order to pay off the remainder of your loan. Make sure you look up reverse mortgage rates before making any decisions.