How to Lower Your Mortgage Payments

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lower your mortgage payment
I was surprised the first time I saw our mortgage payment increase – after all, we had a fixed rate mortgage. And fixed-rate mortgages should always have a fixed mortgage payment, right? Well, they do. But we were also paying into escrow for our homeowner’s insurance and property taxes and after the first year there…

I was surprised the first time I saw our mortgage payment increase – after all, we had a fixed rate mortgage. And fixed-rate mortgages should always have a fixed mortgage payment, right?

Well, they do. But we were also paying into escrow for our homeowner’s insurance and property taxes and after the first year there was a shortfall, so we had to pay an extra $40 or $50 each month to help make up for the escrow shortfall.

We had enough room in our budget that it didn’t affect us too much. But not everyone has that kind of room in their budget. That experience got me thinking about how I could lower my mortgage payment, not only to help in times like these but to pay it off more quickly.

This article is going to look at the different ways that you can lower your mortgage payment. The purpose of this post is to help you save money on your loan and keep more money in your bank account.

Your home is your biggest investment, and your mortgage is going to be the biggest loan that you ever take, but that doesn’t mean that you’ll need to break your bank every month.

How to Lower Your Mortgage Payment

If you pay your mortgage through escrow and it includes your mortgage, property taxes, and homeowners insurance, then those are the areas you want to look at to reduce your mortgage payments. Let’s take a look at them to see if any of them will work for you.

Refinance your mortgage. The most permanent solution, and often the biggest win, is to refinance your mortgage at a lower interest rate. Interest rates right now are at or near all-time lows, making this a great time to refinance your mortgage.

You will have better success refinancing your mortgage if you have 20% or more equity, and you will need a good credit score to refinance your mortgage. This is why having a high credit score is so important: reducing your interest rate by 1% can save you hundreds of dollars each month, and tens of thousands of dollars over the remainder of your mortgage.

The good news is that having a mortgage can improve your credit score over time if you consistently make on-time payments, making it easier to be approved for a refinance loan.

Challenge your property taxes. While I was researching the change in our mortgage payment I discovered our county had our property taxes listed incorrectly. They showed our house as having an extra bedroom and more square footage than it actually had.

I challenged our property taxes and our home was reassessed, saving us several hundred dollars each year. Many counties only allow you to challenge your property taxes at certain times during the year, so be sure to look into the process.

Get new homeowners insurance quotes. Another way to slash your costs is to get quotes for a new homeowners insurance policy by comparing quotes from various companies, such as from Liberty Mutual.

Keep in mind that many insurance providers offer discounts for multiple policies, so you may be able to shop for other insurance policies at the same time and save even more money by bundling policies. Be sure to choose a deductible you can afford, otherwise saving a few bucks can cost you more than you bargained for.

You can lower your homeowner’s insurance rates by remaining with your current insurance provider and selecting a higher deductible, or you can shop around for lower homeowners insurance rates.

Get rid of PMI. Private mortgage insurance can add thousands and thousands of dollars to your annual mortgage payments. If you want to lower how much you’re paying every year, then you’ll need to get rid of your PMI. That additional insurance is used to protect the mortgage company from them not getting their money back.

If you’ve had your mortgage loan for several years, you can refinance your loan, or talk with your mortgage company about eliminating the PMI from your loan. It’s a simple and quick way to save money and keep more money in your pocket.

Throw extra money at your mortgage. Another great way to lower your mortgage payment is to throw any additional money directly at your principal. Making extra payments towards your principal will help you decrease your payments over time.

You probably are not going to see any instant results, but you’ll slowly start chipping away out those mortgage payments. If you have extra money that you’ve been putting in your savings account or spending somewhere else, you should consider making additional payments to your mortgage loans.

Reset your loan. While most people don’t know it, there is a way that you can “reset” your loan. If you have enough money set aside to make a large additional payment towards your mortgage, then the lender will recast your loan, which can shorten the length of the mortgage loan, and that’s going to save you thousands of dollars over the course of the loan.

Refinancing will save you the most money

Refinancing is the best option of these because it gives you immediate results (or as long as it takes to close on your new loan), and the results are typically larger and permanent if you get a fixed rate loan.

You may or may not receive immediate results by challenging your property taxes or getting a new homeowners insurance policy. It usually takes a few months before your next tax bill goes into effect, and in the meantime, you will continue paying the old property tax rate into your escrow account.

Homeowners insurance policies can take effect immediately, but some escrow companies prefer to wait until the end of the year to reconcile their accounts, so in the meantime, you may continue paying the higher rate, which may result in an overage in a refund the following year. But that’s better than the alternative of an increased mortgage payment!

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Saving Money on Homeowners Insurance

Another simple way to save money is by saving money on your homeowner’s insurance policy. You never know what Mother Nature is going to throw at your home. It’s your biggest investment, and it’s vital that your home has the protection that you will need.

If you want to save money on homeowner’s insurance, the first thing that you should do is shop around with different companies before you decide which one is going to work best for you.

Each insurance company is different, and all of them have different ways of calculating insurance premiums. If you want to save money, it’s important that you compare dozens of quotes.

Another easy way to save money on your insurance plan is to raise the deductible for your plan. The higher you raise your deductible, the lower your monthly premiums are going to be for the insurance plan.

For example, if you waste your deductible from $500 to $1,000, you can save yourself around 25% in monthly premiums. More than likely, decreasing your monthly premiums will save you money, but be aware, if you do need to make a claim on your homeowner’s plan, you’ll be required to pay more before the coverage kicks in.

Another way that you can save money is by simply installing a security system in your house. The vast majority of insurance companies will give you a discount if you have a security system that is linked to a company.

There are dozens and dozens of different home security companies on the market that you can choose from. After you have your system installed, all you have to do is contact your insurance company and they can reassess your monthly premiums to reflect the new rates.

One way to save money is to ask your agent about any additional discounts that they may have. Some companies will give you lower premiums if you’ve updated your electrical or plumbing.

They could also have discounts if you’re over a certain age or if you live within a certain distance from a fire hydrant. By asking your insurance agent, you could save thousands and thousands of dollars every year on your insurance plan.

We know that saving money on your mortgage and insurance plans can be difficult, but that’s why we are here to help. It’s our mission to help you save as much money as possible.

Your mortgage is going to be one of your largest bills, but there are several simple ways that you can trim down your payments and save you money. If you have any questions, please contact us today. We would be happy to answer those questions.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Muriel Moss says

    What is the age for senior citizens discount on you property taxes and home owners insurance in the state of Virginia?

  2. Tim Olvey says

    Hi Ryan;
    If I pay extra escrow, say $1200. And my taxes, insurance, and PMI stay the same. Will the mortgage administrator automatically readjust my mortgage to a lower mortgage payment?
    If I did this each year, could my mortgage payment conceivably go down each year (if taxes, insurance, and PMI stay the same)?

    • Ryan Guina says

      Tim, in theory, they could adjust your payment downward a little bit, but you would reach a point where they wouldn’t decrease it any more, and you would run the risk of them decreasing it too much, causing there to be insufficient funds, which would increase your payments for the following year. The best thing is to have the payments be as close to the correct amount as possible. If you want to pay extra, it’s probably best to put it toward your principal so you can reduce the amount of overall interest you pay, and decrease the amount of time it takes to pay off your mortgage.

  3. Tucker Adelblue says

    Hi There. First time commentor.

    Pretty great advice, when I bought my home I paid 10k down and my payment with escrow was $550 a month. Now, nearly 4 years later, my payment has jumped up to 759 a year! When I called my bank to ask what was up they said it was due to insurance premiums increasing in my area. Is this not excessive?

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