How can I lower my mortgage payment?

Lowering your mortgage payment can help it fit more comfortably within your budget, and there area number of ways to get it done. Depending on your credit situation and your willingness to adjust the terms of your mortgage, you could save a considerable amount of money by decreasing the amount you pay for your home each month.

Interest Rate

If there is anything positive about a sluggish economy, it is the availability of competitive interest rates on home loans. Just because you have been paying your mortgage to the same lender for years doesn't mean that you have to stay with them.

Shop around for an interest rate lower than the one you currently have. Talk to a mortgage company about refinancing your home at a lower rate to get lower payments. If the lender agrees, it will pay off your current loan and saddle you with a new one that is better for your budget. In some cases your current lender will see that you are shopping your rate and could offer to beat the competition in order to retain your business. This could result in an even lower payment. Get lenders to compete for your business and you will walk away with the best deal on interest.

Lower your interest rate from 6.25 percent to 5.5 percent on a $100,000 loan over a 30-year term and you will save nearly $600 every year, according to the Lending Tree website.

Term

Extend the term of your mortgage to lower the monthly payment. A 15-year, 6.25 percent mortgage of $100,000 extended to a 20-year term will save $126.49 per month, according to the Lending Tree website.

Consider the extra money you will have to pay if you choose to go this route. While you'll save a considerable amount of money each month, remember that you will be spending more on your mortgage because of accrued interest on the extension. In the above example, the 20-year mortgage would force you to pay an extra $21,086 in interest over the life of the loan.

Shopping Insurance

Look closely at what you are paying for homeowner's insurance. The insurance on your home is often set up as part of your payment through an escrow account. You should not be locked into an insurance company's rates. Gather all the information on your homeowner's insurance and begin shopping for better premiums. It is possible to find saving of hundreds of dollars per month in some cases, according to eHomeMortgages.com.

Let insurance companies compete for your business every two years in the same way lenders do with interest rates. Make sure that you know the details on a cheaper insurance and do not sacrifice necessary coverage.

Interest Only

Refinance your mortgage with an interest-only payment for a specified term. This is effective if you need to lower your payments for a term of two years or less.

The consequences of these loans should be considered carefully before signing anything. When the interest-only portion of the loan runs out, the payment will increase and may be subject to a variable rate that can adjust up or down every so often, making your mortgage payment much higher and unpredictable.

Source:

Lending Tree: How to lower your mortgage payment

eHomeMortgages: 3 Simple Ways to Reduce Your Mortgage Payment or Term