How to Lower Your Mortgage Payment

How to Lower Your Mortgage Payment: In America, the average rental prices tend to jump up year over year. Most tenants will tell you towards the end of the lease term they start getting nervous about the rent increase and as they put in their notice, they start surfing Zillow to see if it’s worth it to stay with the current landlord.

According to iPropertyManagement.com, as of 2022, the nationwide homeownership rate is over 65%! That’s more than expected. Nearly two-thirds of our country are homeowners. You can thank financial literacy, the great mortgage programs such as United Wholesale Mortgage, and low-interest rates in 2020-2021.

As a homeowner, what are ways you can try to lower your Mortgage Payment?

Refinance

When interest rates fell to historic lows mortgage brokers and lenders started to see their business skyrocket. By lowering your interest rate, you not only save lots of money in interest monthly but also during the life of the 30-year mortgage. However, when you Refinance, you are hitting the reset button. Many homeowners do not realize this, but when you are paying a 30-year note to the bank, they enjoy the early part of the relationship, like the honeymoon phase. During the first few years of the mortgage, you are paying a significantly higher amount in interest than in the last few years.

Just imagine you are paying for a 30-year mortgage and you start receiving calls for refinancing. They upsell you to lower your mortgage rates and save on the monthly payment. Well, most people do not realize that by doing this, not only are you paying a lot in refinance fees, but you are also hitting the reset button when reducing the interest you’re paying the bank vs the principal on your mortgage balance.

Taxes

The number one source of Tax Revenue for all states and counties will always be Real Estate Taxes. But has anyone ever taken the time to see if the taxes they’re paying on real estate is worth it?
Let’s say your county assesses your house at $100,000. However, similar properties in the area are all selling for only $50,000. You must pay a lot more in taxes. So how does the county have the right to tax you significantly higher? They don’t. All you have to do is reach out to your county and get a hold of someone from the Real Estate Assessment & Taxes or the Department of Tax Administration. It honestly depends on your county. After getting a hold of them, just simply request a lower tax assessment on your property. And make sure it’s worth it!

If you ever take the time to research your county’s financial information, you will honestly see how much revenue they’re generating just based on Real Estate Taxes. It’s unbelievable! What drives residents of counties even crazier? How counties budget and end up spending the money.

Insurance

Similar to the requirement of having car insurance, every property must have homeowners insurance. And depending on the location of the property, you may be required to have flood insurance. With recent tragedies in Florida, we may soon see new types of Insurance being added on.
Most homeowners, especially while purchasing, do not really care about the price of their homeowner’s insurance. Even if it makes a $100 difference each month. But that goes a long way! That can go from $100 a month to $1,200 a year to $36,000 for a 30-year mortgage…. (Even though most do not keep mortgages for that long)
But even a penny counts. And out of all homeowners, how many bother their insurance companies for a discount?

Typically, you would think insurance companies save you on a rainy day. That’s not always the case. All insurance companies have a business model: Collect money & be as frugal as possible. They have policies in place where they try to evade doing anything for you. According to Quicken Loans, only 1 in 20 people file claims annually on their homeowner’s insurance policy. That’s only five percent!! Your mortgage company requires you to have a homeowner’s insurance policy just in case of a flood, hurricane, tornado, or any other natural disaster. But when it comes to any real issues, Insurance companies will try to avoid always covering anything.
Instead of trying to pay a higher premium for a better insurance program, just go for the best deal to lower your monthly mortgage.

Private Mortgage Insurance

This is not the same thing as Homeowner’s Insurance. PMI and Homeowner’s insurance are two completely different things. PMI stands for Private Mortgage Insurance. It’s required when you do not pay at least 20% down (depending on the mortgage program) and is added to your monthly payment. The PMI was designed to protect mortgage lender’s just in case you default and stop making the monthly payments. Private Mortgage Insurance is inserted into a pool of money. And that pool of money basically helps all default mortgages if they’re a part of the PMI program to prevent the bank that had loaned the money from taking a significant loss.
In the early 1900s, there was no such thing as buying a house for anything less than 20% down. Then they came out with VA loans specifically for military veterans. Then to make it fair to everyone, they started developing sub-prime mortgages. We all know about the 2008 crisis. However, following that, the government developed Private Mortgage Insurance in order to protect the big banks from any significant losses.
So how do you get rid of the PMI? It’s very simple. Review the terms and conditions of your loan. Even if you put down three percent or five percent, if you have a loan to value (meaning your loan balance divided by the market value of your house) is 80% or lower, you have the right to ask your bank to remove the PMI.

Condo Fee or HOA Fee

In America today, you will not see many properties built without a Condo Association or Homeowner’s Association. One thing that all homebuyers need to keep in mind is to review the financials of the association that they are about to be correlated with.

  • Is the association collecting enough in annual revenues?
  • Is the association charging too much in fees?
  • What is the association covering?
  • Does the association do enough to help?
  • Does the association do too much?
  • Read reviews on the association.

When associations were first established, it was formed to ‘help thy neighbor’. Today it’s a pure business model. With the business model, most associations just overcharge and have the right to raise fees. You will always see associations raise monthly fees, especially with inflation. Not many times will you see a reduction. But if you or your members think that the fees are not being charged appropriately, by bringing it up in the meetings and having the proper support, you can request a change. Also, the board members of the association are also a key factor.

Keep in mind your mortgage payment isn’t just your Principal & Interest. It’s broken down into so many other forms, but you are still in control as far as bringing it down. Just talk to your lender, insurance agent, association, or county with confidence and show them why you deserve a lower mortgage payment.

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