In part one of this two-part blog, we went over some of the options available to you for lowering your monthly mortgage payments without refinancing the mortgage itself. While this is often the primary outlet buyers use to change their payment amount and make it more manageable, there are other options out there as well.
At VIP Mortgage Inc., we can help walk you through all these various options, plus potential refinancing availability if you’re looking to go down this road. In today’s part two, we’ll go over a couple other basic tactics that involve no additional mortgage-related services whatsoever, plus a couple other options you may not have considered.
One of the simplest ways to save money long-term on your mortgage without refinancing is simply making larger payments during the earlier periods of the loan if you’re able to. One common strategy here is making biweekly payments for some period of time at the start of the loan – this means that rather than making 12 monthly payments or the equivalent 24 twice-monthly payments, you actually make 26 payments a year and pay slightly more, lowering your principal balance and interest in the process. You don’t change the actual payment amount or the rate itself, but within a few years you’ll find yourself needing to make lower payments.
A loan recast is a theme that’s often attached to your own decision to make larger monthly payments. At a certain point after doing this, you want your lower-than-expected balance that you achieved through these larger payments to take effect and lower your average monthly payments moving forward – at this point, you ask your lender for a recast, which re-amortizes the loan and reflects the actual average payment you need to make each month now that you’ve put in the hard work.
Another area you can consider at the beginning of a mortgage situation is choosing an adjustable-rate mortgage, or ARM. These loans will come with rates that begin fixed, but after a certain period of years become variable based on market factors, meaning they can rise or fall regularly.
ARMs carry risk, of course: Your rate could always go up, and there’s nothing you can do when this happens but simply pay more that month. But if you’re an experienced investor and you think you see favorable market characteristics, an ARM might benefit you in a huge way over the course of the loan if rates drop.
Finally, you may consider opening a second mortgage if rates are favorable. This may bring you a lower rate than your first mortgage, often through home equity loans or adjustable-rate HELOC options, and the numbers may make more sense than a refinance – our experts can help you determine which choice would be best for you here.
For more on options for lowering your mortgage payments without refinancing, or to learn about any of our mortgage loan services, speak to the staff at VIP Mortgage Inc. today.
*The views and opinions expressed are my own and do not necessarily represent the official policy or position of Primary Residential Mortgage, Inc.