Four tips for lowering your mortgage payment
Chances are, your mortgage payment is your biggest expense every month. So, it’s important that this payment is a figure that doesn’t break the bank and you can pay it off in full when its due. When your mortgage is too high, it can be a major source of stress and can affect your ability to save up and meet other financial obligations. If you’re currently trying to manage a crushing mortgage bill, you’re in luck! We’ve come up with a few helpful options to lower your monthly mortgage payment.
If you’re looking for an effective long-term solution to a hefty mortgage payment, refinancing your loan may be the way to go. Opting to get your mortgage refinanced means that you’ll be renegotiating your existing mortgage loan agreement with your lender. This is usually done to secure a lower interest rate on your existing loan, and potentially a smaller monthly mortgage payment. However, before you refinance your mortgage, there are important factors to consider. These include but are not limited to:
As with your initial mortgage application and approval, your credit score plays a big role when it comes to mortgage refinancing. Lenders want to know how financially responsible you are, and your credit score is a good indication of this. If you have a low score, chances are your request to refinance your mortgage will not be approved. Learn more about establishing a good credit score here.
Generally, lenders want to know you have some equity in your home before you refinance your mortgage. The more equity you have in your home, the easier the refinancing process will be.
When refinancing your home, you want to shop around for the best options available. Lenders may offer you a second mortgage, a home equity line of credit (HELOC), or other types of loans and lines of credit. Learn more about these options and the refinancing process here.
Extending your mortgage repayment term is a simpler way of reducing your monthly mortgage payments. A longer repayment term gives you more time to pay off your loan, thus resulting in a smaller amount being paid off each month. Although this option gives you more time to pay off your mortgage, it also results in you paying more interest. Nonetheless, this is often best for homeowners who need immediate relief for their financial issues.
Generating additional income is another great way to reduce the burden of your monthly mortgage costs. For homeowners with extra space, this can be easily done by renting out a portion of your home. This can be a spare bedroom or even your entire basement. The additional cash flow brought in by a tenant can be put towards your monthly payment – helping ease your financial stress. This option can either be utilized long term or until you’re able to use other options.
Interest-only mortgages have recently resurfaced in Canada and are a great short-term fix for high mortgage payments. An interest-only mortgage is one that allows homebuyers to pay only the interest on their loan for a set period of time, usually four to five years. During this period, your monthly payments are significantly smaller in comparison to a traditional mortgage which requires you to pay your principal plus interest monthly. Interest-only mortgages are a great option for homeowners who are facing temporary financial difficulties.
When considering any of the options above, it’s important to be aware of any fees associated with adjusting your mortgage. These will vary depending on your lender, so it’s best to check with your bank or financial advisor.
Hefty monthly mortgage bills are a source of stress for many homeowners. However, with these options at your disposal, you’ll be able to find some long and short term financial relief.
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