Having a mortgage payment might significantly burden your budget, especially with the rising cost of living. Luckily, several ways exist to reduce your mortgage rate and free up funds to afford the daily necessities, pay off debt, or invest.
Refinancing is the most common and convenient way to reduce a mortgage interest rate. However, it’s not always the best route for some homeowners wishing to cut their monthly payments. Those with low credit might not qualify for refinancing. But alternative ways exist to save money and decrease your mortgage rate without refinancing.
Recast Your Mortgage
Recasting a mortgage is a great option, but it will be only valuable to those who can afford lump-sum payments. If you put a wad down on your loan or make periodic extra payments, your lender will recast or calculate your monthly payments based on what you have remaining and the amount you have already paid.
Request a Loan Modification
SmartAsset stated that some lenders might reduce your interest rate, extend the loan term, forgive a portion of the balance, or some combination of the three. Some mortgage lenders usually make concessions for borrowers falling behind on payments by temporarily or permanently modifying their mortgage forbearance.
Surging mortgage rates add to the burden of budgeting, especially with the increasing daily necessities. (Photo: Getty Images)
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Cancel Your Mortgage Insurance
Lenders usually require Private Mortgage Insurance (PMI) for a conventional loan if you put in less than a 20% downpayment. However, once you’ve reached 20% equity in your house, you can request to remove the insurance from your loan – saving you 0.2–2.0% PMI on loan per year. According to The Balance, once the borrower has a balance of 78% of the original value, the lender must automatically remove the PMI.
Ask for a Lower Rate
It is the most straightforward and unconventional method to reduce your mortgage rate. Although, it is much easier to do if your original loaner also collects your payments, rather than a third party and if the current rate is considerably higher than market comparables. The Truth About Mortgage assured borrowers that lenders would want to keep the business with you and are usually up open for negotiations whenever interest rate is concerned.
Rethink Your Payment Patterns
If the reduction techniques above don’t work out for you, you can try to save money (if you can afford it) in the long run by shifting your payment habits. You can reduce your mortgage payments by switching from monthly to yearly. Note that this will not decrease your mortgage rate or monthly payments but will help you save money by chipping away at the overall loan balance.
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