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How to Lower Your Monthly Mortgage Payment

A man kissing his little baby on the cheek.

A thousand bucks is a lot of money. Put that in your wallet and it can buy plenty of groceries, gasoline, electronic gizmos and other items that you either need or enjoy. But the fact is, most U.S. homeowners spend more than $1,000 a month on just one thing: their monthly mortgage payment. Although experts warn families to not spend more than 30% of their income on housing, sometimes we find ourselves stretched a bit thin.

Outside of moving into a less expensive place, what can you do? The good news is there are various steps you can take to reduce your mortgage payment. In many cases, your local financial institution, like Piedmont Advantage Credit Union, can assist you in your efforts to wrestle with this big budget item.

Refinance Your Mortgage

One time-tested strategy is to refinance your mortgage. Homeowners can often find an interest rate that’s lower than the one on their existing loan. On a $250,000 conventional mortgage, a 1% rate reduction cuts monthly payments by nearly $150. Even factoring in the new closing costs, you can come out way ahead if you’re planning to keep your house for more than a few years. Piedmont Advantage Credit Union offers a full range of refinancing options.

Think Unconventional

Maybe overall interest rates haven’t dropped since you got your current mortgage. Still, you have refinancing options. How about a loan that offers an extra low rate – and lower monthly payments -- for the first five or seven years? After that initial period, the rate adjusts based on certain economic factors. These adjustable rate mortgages (ARMs) can be excellent choices for people planning to sell their house within a few years or who expect their financial fortunes to improve over time. Piedmont Advantage Credit Union has an ARM option as well as a Liberty Loan option that might be perfect for your situation.

Go Longer

Another way to trim monthly payments is to extend the loan repayment period. Some financial institutions refer to this as re-amortizing. Let’s say you have a 30-year-mortgage and have made five years’ worth of payments. You can ask the lender to allow you 30 more years to pay off the loan. Because you owe less than when you started, your monthly payment will be lower. Some lenders will even stretch the repayment period to 40 years.  Piedmont Advantage Credit Union is happy to work with borrowers with mortgage payment challenges. Just contact our loan representatives to make an appointment.

Get Government Help

When the housing crisis hit, the federal government launched several programs to help struggling homeowners avoid foreclosure. If you qualify, you may be able to lower your monthly mortgage payments. Perhaps the best known are the Making Home Affordable (MHA) program and its main component, the Home Affordable Refinance Program (HARP).

Other Ways to Save

When you make your monthly mortgage payment, you’re often paying for more than your home loan. In many cases, your local property taxes, homeowners’ insurance and private mortgage insurance (PMI) are all included. Slicing into any of these costs can take a big bite out of your monthly payment.

  • PMI. Most home buyers make a down payment. If that payment is less than 20% of the home’s value, lenders usually require private mortgage insurance. That insurance usually costs between 0.5% to 1% of the loan amount on an annual basis. So even on a relatively small $100,00 loan, you could be paying $1,000 a year (or about $85 a month) in premiums. But once you’ve owned your home for a few years, it’s likely that you’ve paid off 20% of its value. At that point, you should contact your lender and ask whether your PMI can be dropped.
  • Tax relief. Many states have property tax relief programs for veterans, seniors and the disabled. In North Carolina, you can apply for such programs by filling out this form and checking with your local taxation department to see whether you might qualify. If you’re an average homeowner, you might still have a fighting chance. Property taxes are based on periodic assessments of your home’s “fair market value.” But assessors often make errors that overstate property values. And even if their initial assessment is accurate, changes in the housing market, zoning laws, or general make-up of your neighborhood can cause it to become outdated. Contact your local municipal or county offices to learn how to challenge your assessment.
  • Insurance. You can’t just cancel your homeowners’ insurance to save money. But you might be able to reduce how much you’re paying. If you want to keep your current policy, see if you can earn extra discounts by installing smoke detectors or a home alarm system. And make sure you’re not insuring things you no longer own, like that old garage you tore down or jewelry collection you sold off. Sometimes the best bet is to go out and seek new quotes from other insurance companies. Piedmont Advantage Credit Union offers a wide range of insurance products, such as home, auto, life and long-term care, and health insurance that might help you save enough money to reduce the strain on your monthly finances.

Headquartered in Winston-Salem, North Carolina, and founded in 1949 within the airline industry, Piedmont Advantage Credit Union (PACU) now serves member-owners, who reside, work, worship or attend school in one of the 13 counties it serves in North Carolina or who are employed by one of its many employer companies. These 13 counties are Bladen, Brunswick, Columbus, Cumberland, Davie, Duplin, Forsyth, Guilford, Iredell, Mecklenburg, New Hanover, Pender and Rockingham. A nonprofit cooperative financial institution, PACU has 10 branches throughout its service regions and employs a workforce of over 100.

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