Owning a home is a meaningful part of the American Dream, but the accompanying mortgage can often feel more like a burden. Thankfully, there are a few mortgage relief secrets that homeowners can leverage to ease this financial load.

The Best Mortgage Relief Secrets To Save Money

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There are six effective strategies to help you lower your monthly payments, reduce interest, or even eliminate mortgage debt faster.

1. Refinance With a Lower Interest Rate

Refinancing your mortgage can be a powerful tool to save you money over the course of your loan. Refinancing is the process of replacing your current mortgage with a new one. The goal of refinancing is usually to secure better loan terms, often in the form of a lower interest rate. By reducing your interest rate, even by a small amount, you can significantly cut down on the amount you pay over the lifetime of your mortgage.

To illustrate, think of having a 30-year mortgage of $200,000 with an interest rate of 4.5%. If you refinanced to a rate of 3.5%, your monthly payment could decrease by almost $120. This could lead to savings of tens of thousands of dollars.

Timing is key when it comes to refinancing. A good time to consider it is when interest rates are lower than what you're currently paying on your mortgage. It's important to keep an eye on market trends. Real estate gurus offering mortgage relief secrets and other tips will point out when interest rates are low and when it’s a good time to refinance. When rates drop, reach out to your lender to discuss locking in a better rate.

However, it's also essential to consider how long you plan on staying in your home. If you intend to move in a few years, the costs associated with refinancing might outweigh the potential savings from a lower rate.

Exploring Discount Points

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Can you still get a lower interest rate if market rates haven't dropped? Potentially, yes! One strategy is to buy down your rate with discount points. These are fees paid upfront at closing that allow you to secure a lower interest rate on your loan. Each point is equal to 1% of the loan amount. For a $200,000 loan, one point would cost you $2,000.

Typically, one discount point can lower your rate by about 0.25% to 0.5%. However, this can vary based on the lender and the loan type. Before proceeding, calculate the break-even point to ensure the savings from the lower rate outweigh the upfront cost of buying points.

2. Get Rid of Mortgage Insurance

When a homebuyer can’t afford a 20% down payment on a property, the lender faces a higher risk. To mitigate this, lenders require the homebuyer to purchase mortgage insurance. While this makes high loan-to-value mortgages possible, it also adds an extra cost to your mortgage payment.

There are two main types of mortgage insurance, depending on your loan type: Private Mortgage Insurance (PMI) for conventional loans, and Mortgage Insurance Premium (MIP) for FHA loans. Although they serve the same purpose, the processes for eliminating them differ.

Eliminating Private Mortgage Insurance (PMI)

Once you've accumulated 20% equity in your home, you can request your lender to remove the PMI. This can happen in two ways:

Natural Amortization: As you continue to make regular mortgage payments, you naturally reduce your loan balance, which consequently increases your home equity. Once your loan-to-value ratio reaches 80%, you can ask your lender to cancel PMI.

Home Value Appreciation: Sometimes, home values increase over time due to a flourishing real estate market or significant home improvements. In such cases, your home's equity may reach the 20% threshold sooner than expected. An appraisal will likely be required to verify your home's current market value.

When you reach 22% home equity through your regular payment schedule, your lender is required to cancel the PMI automatically.

Eliminating FHA Mortgage Insurance Premium (MIP)

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For FHA loans, the rules are a bit different. If you received your FHA loan after June 1, 2013, and put down less than 10%, you're required to pay MIP for the life of the loan. The only way to get rid of MIP in this situation is to refinance into another loan type, such as a conventional loan. However, if you put down more than 10%, MIP can be dropped after 11 years.

3. Extend the Term of Your Mortgage

The goal of many homeowners is to pay off their home loan. Therefore, term extensions are often overlooked mortgage relief secrets. Extending your mortgage term allows you to spread out your loan payments over a longer period.

Typically, mortgages come in standard lengths, such as 15 or 30 years. The length of the term is inversely related to your monthly payment: A longer term means lower monthly payments, while a shorter term means higher monthly payments. However, it's important to note that a longer term also means you'll pay more interest over the life of the loan.

Say, for example, you've been dutifully paying off your $200,000, 30-year-fixed mortgage for the last 10 years. Your original monthly payment, with an interest rate of 4.5%, was about $1,013 (not accounting for taxes and insurance). But in the decade since you took out that mortgage, you've managed to whittle down your loan balance to $160,000.

If you were to extend your mortgage term by refinancing to a new 30-year loan, you'd be spreading that $160,000 balance over an additional 30 years. Even at the same 4.5% interest rate, your new monthly payment would be approximately $811. That's a reduction of over $200 every month, providing substantial relief to your budget.

4. Shop Around for Lower Homeowners Insurance Rates

Homeowners insurance covers losses and damages to an individual's house and assets within the home. It also provides liability coverage against accidents on the property. If you have a mortgage, your lender probably requires you to have homeowners insurance. But that doesn't mean you're stuck with a high-cost policy. Shopping around for more affordable insurance rates can lower your monthly mortgage payment and ultimately save you money.

Getting Quotes

Insurance companies understand that homeowners are in search of mortgage relief secrets, and they’re usually more than willing to help you lower your rates as long as you use their company. It’s in their best interest to provide you with a favorable quote.

Be certain to shop around and get homeowners insurance quotes from multiple insurance companies. This process is relatively easy, and with the proliferation of online platforms, it can be done from the comfort of your home. When comparing quotes, make sure you're looking at similar coverage levels; this way, you'll know you're making a true apples-to-apples comparison.

Asking for Discounts

When contacting insurance companies, don't hesitate to ask for discounts. Many insurance providers offer reductions based on features of your home, such as security systems, smoke detectors, or even weather-resistant materials. You may also find discounts tied to your personal circumstances, such as your employer or job status.

Bundling Your Insurance Policy

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Another effective way to save money is by bundling your homeowners insurance with your auto insurance or other types of insurance you may need. Insurance companies often offer discounts for carrying multiple policies with them. So, while you're shopping around, be sure to ask about bundling options.

Adjust Your Coverage and Deductibles

It's also a good idea to review your current coverage levels to ensure you're not overpaying for insurance you don't need. For instance, if your policy includes coverage for items you no longer own, it might be time for an update.

You can also consider raising your deductibles. The deductible is the amount you'll pay out of pocket before your insurance coverage kicks in. By choosing a higher deductible, you can decrease your premiums. However, if you need to make a claim, you'll have to pay that higher deductible, so it's essential to set it at an amount you can afford.

Talking to Your Lender

Before you make any changes to your homeowners insurance, check with your mortgage lender. They may have coverage requirements that you need to maintain. After you've made changes and secured a more affordable policy, provide your lender with the new policy details to ensure they adjust your mortgage payment accordingly.

5. Appeal Your Property Taxes

Property taxes are primarily based on the assessed value of your property, a valuation performed by a local or county assessor. Various factors, including the size of your home, the number of bedrooms and bathrooms, the property location, and other amenities contribute to this assessed value. However, assessors are human, and sometimes errors may creep into the evaluation process, leading to a higher tax bill.

If you believe your property has been overvalued, appealing could result in a reduced assessment, lower property taxes, and consequently, a lower monthly mortgage payment.

The first step in this process is to acquire a copy of your property tax bill, often available from your local or county tax office's website. This bill will contain your property's current assessed value.

Next, evaluate if there's a potential error. Has the assessor overstated the square footage of your home? Is there a discrepancy in the number of rooms? Or perhaps, your property is assigned to the wrong tax zone? If any of these mistakes are present, you have solid ground for an appeal.

Now, it's time to gather evidence to back your claim. This could include data on comparable homes in your neighborhood, property sale prices, or even a recent independent appraisal of your home. The aim is to prove that your property's assessed value is higher than it should be.

Once you've gathered sufficient evidence, you can formally appeal your property tax assessment. This process varies depending on your local regulations, so it's important to check with your local, county, or regional tax board for specific procedures.

6. Rent Out Part of Your Home

Of all the overlooked mortgage relief secrets, renting out part of your home can save the most money.

“House-hacking” is a term coined by real estate investors that describes the process of renting out part of a property you live in to offset the costs associated with owning that property. This could be a spare bedroom, the basement, or even an additional unit on your property. The income generated through this strategy can be applied directly toward your monthly mortgage, effectively reducing the cost of homeownership.

Before you start, research the local rental market to determine the amount of income you can realistically generate. Sites like Craigslist or Zillow can provide a snapshot of comparable rental prices in your area. You’ll want to take into account factors such as the size of the space, available amenities, and the location when setting a price.

Also, it's vital to check local zoning laws and homeowners association (HOA) regulations. Some areas or HOAs have rules against renting out parts of residential properties.

Additionally, consult with your home insurance provider to understand how renting out part of your home might affect your policy. You might need to adjust your coverage or even get a landlord insurance policy, depending on how frequently you plan on renting out the space.

Mortgage Relief Secrets Save Big Money

Understanding these mortgage relief secrets can lead to significant savings and a smoother path toward fully owning your home. Don't let the complex world of mortgages overwhelm you. Instead, use these secrets to your advantage and make your dream of homeownership a comfortable and affordable reality.