Making extra payments
If you have the funds available, making extra payments is the easiest way to chip away at your mortgage balance. The extra payments are applied towards your principal, not interest. Therefore, not only are you reducing your overall loan balance, but you’ll be paying interest on a lower balance as well.
Cut your PMI
If the down payment on your home was less than 20%, then you are likely required to pay private mortgage insurance, or PMI. The good news is that you can petition your lender to cancel the PMI once your mortgage balance falls below 80% of your home’s appraised value. Two scenarios typically cause this to happen: your home’s value goes up or you have repaid some of the principal. Be aware that you may be required to do a new appraisal.
Challenge your property assessment
Property taxes can cost you thousands of dollars each year. However, if you think your home has gone down in value, and this was not accurately accounted for in your tax assessment, then you have the ability to petition your assessor and appeal the assessment.
Recast your mortgage
Some lenders will recast, or reset your monthly payment when you make large payments towards the principal. When the loan is recast, your monthly principal and interest are recalculated, which means you’ll have a lower monthly payment over the remaining term of the loan.
This option is designed for homeowners who are late on payments or are going through a financial hardship. If you’re eligible, you may be able to modify certain terms of your loan such as rate, term or principal balance. The goal is to make it more affordable, so that borrowers can make their payments and stay in their homes.
Refinance your mortgage
Refinancing your mortgage to a lower interest rate lowers your monthly payment a saves you money on interest payments. Of course, there are costs associated with refinancing, so it’s important to make sure the costs don’t outweigh the benefits.
If you’re looking for a way to eliminate your monthly mortgage payments, a reverse mortgage may be an option. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan. A HECM enables seniors to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.