4 Ways to Lower Your Monthly Mortgage Payment

Are you being overwhelmed by your home mortgage bill? Want to lower the monthly payments? Here are a few ways you can do that.

Refinance Your Mortgage

Should you refinance? The answer depends on the age of your loan and the difference between your current and potential new interest rate.
Home loans amortize, which means you pay mostly interest towards the beginning of the loan term and mostly principal towards the end of the term. As a result, interest rate is most important towards the start of a term. The interest rate makes less of an impact towards the end of the term, when your payments are predominantly principal.
Translation: the newer the mortgage, the stronger the argument that you should consider refinancing.
But refinancing turns the amortization clock back to square one, and also gobbles a few thousand in closing costs, so a small difference between your old and new interest rates -- say, 0.25 percent -- might not be justified. Run a spreadsheet to see if refinancing is right for you if the interest rate spread is 0.5 -- 1 percent or higher.

Drop Your PMI

Are you paying private mortgage insurance, or PMI? If you bought your home with a down payment that's less than 20 percent, you might be paying PMI, which is adding hundreds or thousands to your mortgage each year.
There's good news, though: you won't be stuck paying PMI forever. First, repay enough of the mortgage that you've gained 20 percent equity in the house. (You can also gain equity faster if your home value rises -- but, of course, you have no control over that).
Then contact your lender to inquire about the process of dropping your PMI. Lenders won't drop the PMI automatically -- you'll have to request it. Many lenders will send an appraiser to determine the home value before the lender verifies that you own a 20 percent equity stake.

Get a Longer Loan

Suffering under the hefty monthly payments that come with 15-year or 20-year mortgages? Extend your mortgage into a conventional 30-year term in order to cut your monthly payment. The bad news: your interest rate will rise. The good news: you can still choose to make additional payments on the mortgage, as if you were paying a 15-to-20-year loan. These extra payments will help you satisfy the loan more quickly, without obligating you to make massive payments if, say, there's an emergency that leaves you cash-shy for a month or two.

Challenge the Tax Assessment

Here's an uncommon way to lower your monthly home payment: fight the tax assessment.
A conventional mortgage payment consists of your principal payment, your interest payment, and your "impounds," which is a monthly payment that the lender puts towards your property taxes and homeowners insurance.
If you default on your property tax bill, the county can put a lien on your house. The governments lien will take priority over the lenders lien.
As a result, the lender collects your property taxes each month in order to protect its interest in your home. This payment sits in escrow until the yearly property tax bill is due.
Property tax is based on the county's tax assessment of how much your home and land is worth.
Many of these assessments are too high, especially in the wake of the housing crash, which diminished home values. Sometimes assessments are also too high if the area has been re-zoned, the new zoning has caused home prices to decline, and the declined prices aren't reflected in the assessment.
Homeowners can protest the assessment by filing a protest with the county or requesting a hearing with the state Board of Equalization. If the protest is approved, the homeowner's taxes drop, which means that their monthly mortgage payment also drops.
(Note: an "assessment" is different from an "appraisal." The county does an assessment for tax purposes. A private company does an appraisal, generally for loan and purchasing purposes.)

Source : budgeting[dot]about[dot]com

Are You Ready to Buy a Home?

Owning a home is a usual goal for many Americans. A home provides a feeling of stability and community. You can develop relationships with your neighbors and establish roots in your community.You can customize and shape that home to your liking; add a room or knock down a wall; the choice is yours. People like owning things and this includes homes.

However, homeowners in many parts of the country have watched the values of their property decrease in recent years. While this isn’t good news for sellers, it does offer an exceptional buying opportunity for many people. Real estate is cyclical; values fall and values increase, but historically real estate has proven to be a good investment. It’s difficult to predict when the absolute bottom of the market will be reached in any particular area, and savvy investors may want to act now to take advantage of the low mortgage interest rates.

If you need a mortgage loan to purchase a home, the first thing you should do is to talk with a mortgage broker or banker. You can start with the bank where you have your checking or savings account. Call the local office and make an appointment to speak to a loan officer. Bring the last two years of your tax returns with you to the meeting. Loans are difficult to obtain and a loan officer can look at your credit report and discuss various options that are available to you. There’s no charge for the meeting.
A bunch of numbers on a lender's schedule do not really indicate whether or not you can afford a house, because they say nothing about how you manage your money. Before you start looking at houses or talking to real estate agents, follow these steps to see if you're ready to buy a house.
The most common requirements for a residential, owner-occupied mortgage loan are two years of steady work, no recent foreclosures or bankruptcies, a minimum credit score of 640, U.S. citizenship or resident alien status and monthly debts – credit cards, auto leases, alimony, child support, projected housing expenses -- shouldn’t be more than 36 percent of your gross monthly income. This is also known as your debt to income ratio.

If you fail to qualify for the mortgage, the loan officer might be able to help you improve your situation. Low credit scores can be improved by paying off some debts and lowering the amount you owe on the credit cards; you can also ask for a higher credit limit on an existing card. If you don’t have two years of continuous employment, plan on delaying the purchase until you meet that milestone. If your income is insufficient to qualify, you might be able to add a co-borrower who has sufficient income and a good credit score to the mortgage. The loan officer will explain the details to you. Lastly, don't forget about the closing costs involved in buying a home. They can add up to thousands.

However, even if you qualify for a home loan, are you really prepared for ownership? When the house needs repairs, there’s no landlord or property management company you can call; maintenance is your responsibility. Property tax and homeowner’s insurance costs may periodically increase and a high insurance deductible means that you’ll pay out-of-pocket for many repairs.

Do you have a stable job? If you lose it, do you have enough of a cushion saved that allows you to continue to make the mortgage payments until you find new employment? Many families live paycheck-to-paycheck and accumulate little in savings. While this may be an acceptable situation for a tenant, a homeowner can be faced with many unexpected costs.

Look at your lifestyle and financial health and determine if home ownership is right for you. If you do decide to move forward, be sure not to make a major credit card purchase until after the closing. The increased debt may kill the deal. Otherwise, have fun looking at homes and choose your advisors wisely.

Source : financialplan[dot]about[dot]com