Question:

How to reduce mortgage payment?

Answer:

There are several ways to reduce mortgage payment. Unlike what many people think, biweekly plans can't really cut the mortgage payment. However, as a result of quicker principal amortization when utilizing biweekly mortgage payment plans, 20% of equity is achieved faster and the monthly payment drops.

Best Steps to Reduce Mortgage Payment

If you are stuck with particularly high interest rates of a subprime loan, make sure you refinance to better terms once your credit and circumstances improve. If you don't yet have a home loan and your credit score is somewhat damaged, you could consider a government-backed mortgage program - FHA or VA loans for better rates and loan conditions.

If you live in a high cost area (as California), you might have to use 40 or 50 year mortgages for a start and refinance, or prepay the loan, if you can afford it. With FHA loan limits raised over $700,000 for high cost areas and a median house sales price over $430,000 it might be vital to take any chance to reduce the monthly mortgage payment. However, 40 and 50 year mortgages don't lower the monthly payment too much. Prepaying points will be more effective.

Most borrowers would use an Option ARM to reduce their mortgage payment, but some will not feel so comfortable with the idea of possible negative amortization, and prefer getting a longer term mortgage.

Best approach may be to make monthly prepayment of the loan. An extra 1/12 of the monthly payment applied towards the loan principal produces basically the same effect as a biweekly plan. Even though your mortgage payment will remain the same and even increase, the result is much faster amortization of the loan, shaving off years of the loan and thousands in interest cost.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: