Ways You Can Reduce Your Monthly Mortgage Payment

Are you looking to lower your monthly mortgage payment? Many homeowners assume that they can cut back on their payments because they are in a lower-interest-rate environment.

But the reality is that while there are ways to cut back on your monthly mortgage payment, it requires some foresight and creativity; and that’s something that almost every homeowner can benefit from.

Reducing your mortgage payment requires you to look beyond the surface of your current loan.

It means taking the time to understand your unique financial circumstances and identifying your upside and downsides.

Here are ways you can reduce your monthly mortgage payment.

Conduct a Market Analysis

The first thing you need to do is conduct a market analysis. This typically involves an assessment of your home’s value and the estimated amount of money you’re going to need to close when you sell it.

Knowing your potential down payment and how much of it will be needed to close on the house can help you plan and make the best deal possible when selecting a mortgage lender.

Determine Your LTV

The next step is to determine your loan-to-value ratio (LTV), the percentage of your property value that you plan to use as a down payment.

For example, if you’re buying a $200,000 home with $60,000 already pledged as a down payment, your LTV will be 80%.

However, there are some situations where your LTV can be higher. For example, if you’re purchasing land to build on it and sell it later in the future at a higher price point, this can skew your LTV figures.

Calculate Your Down Payment

The next calculation you need to make is to determine what percentage of the desired purchase price of your home loans you’re going to be able to contribute as a down payment.

Frequently, buyers will only get one shot at buying a home to have some flexibility in their savings.

But remember that a down payment is simply money that gets tied up in the mortgage until it is paid off.

If you’re planning on living in the house long enough for all of your payments to be made first, you will have little flexibility if you contribute just 20% of the purchase price as a down payment.

Negotiate Down Payment Increases

Depending on your current financial situation, it’s possible you might not be able to come up with enough down payment to close on a house completely.

You might consider negotiating a lower rate or increasing your down payment amount. You’ll want to let the lender know that you are willing to increase your cash savings and go over budget if you have access to additional funds.

Note that some mortgage lenders won’t give you more than 5% of the home value as a mortgage contribution, so if you exceed this figure, you should discuss it with your lender before finalizing the transaction.

Market analysis is the most important step in negotiating a lower mortgage payment.

By reviewing your current financial situation and identifying the ways you can improve it, you can plan ways to keep your monthly payment where it needs to be.

Tags: home loans, LTV, Market Analysis, Mortgage Payment

Category: Mortgage