While most people are eager to buy their first place and achieve their dream of homeownership, they aren’t always prepared for the expenses that come with owning a home.
Owning a home involves more than paying the mortgage every month. You’ll have to pay insurances, taxes, utilities, and other household expenses. And if you’re not careful, your money can quickly run out.
If you need to reduce your monthly expenses, consider three tips to lower your mortgage payment.
Extend your home loan term: The majority of mortgage loans have a 30-year term. However, borrowers who want to pay off their mortgage sooner may opt for a 15-year or 20-year term. Shorter terms are ideal, and they help borrowers build equity quicker. But, these loans involve higher payments, which can create a financial burden. Refinancing the mortgage loan and extending the loan term can reduce mortgage payments and ease the financial burden. As well, homeowners with a 30-year term can talk to a mortgage broker or lender about 40-year mortgages.
Acquire a lower interest rate: Applying for a home loan with fair or less than perfect credit can result in a higher interest rate, which increases monthly payments. However, making credit improvements can justify a lower rate in the future. Whether you want to reduce the rate on your existing fixed rate home loan, or convert your ARM or interest-only mortgage to a fixed rate, you can refinance and possibly save a couple hundred dollars on your mortgage every month. Use the savings to pay off debt or start an emergency fund.
Sell your house: If you’ve overextended yourself, and you can’t find a solution to your cash flow problems, perhaps it’s time to let this house go and buy something cheaper. Find a good real estate agent and put the house on the market. If you can’t find a buyer, look for tenants.