The Costa Mesa Blog by Torelli Realty

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How To Get A Lower Mortgage Payment

Has your mortgage left you with such a tight budget, you’re now planning to eat 25 cent ramen every day for the next 30 years?  We get it.  That’s why most lenders comb through your financials so carefully, only loaning what you can afford.  The problem is: things change.  People get laid off, roofs spring leaks, cars breakdown, family get sick.  There are countless of unpredictable things that can happen and take a huge chunk out of your budget.  So if you’ve found yourself scraping to get by each month, keep reading and click this link. We are sharing tips and tactics to get a lower mortgage payment so you don’t have to stress out.

Refinance

This one’s a no-brainer.  Haven’t you heard? Interest rates are at an all-time low, and lower interest means lower monthly mortgage payments! Let’s say you took out a 30-year fixed-rate mortgage for $250,000  in January 2014 at 4.43% (the going rate at the time, according to Freddie Mac).

If you refinanced today at 3.5%, you would save approximately $48,141 over the term of the loan (assuming closing costs of approximately $3,000). Or, to really make you run out and refinance, let’s call it about $125 extra in your pocket per month right this minute. It’s like getting a raise without even having to work harder.

If you switch to a 20-year mortgage, on the other hand, your monthly payment would more or less stay the same, but you’d be paying for 10 fewer years, saving you almost $120,000 in interest over the life of the loan. That’s a nice chunk of change!

Ditch your mortgage insurance

If your down payment totaled less than 20% of your home’s value, most lenders will require that you pay mortgage insurance. That will cost you around $225 a month on a $250,000 house if you only put down 5%. To eliminate this extra burden, you can always try scrounging together enough money to reach that 20% threshold, but there’s another (far easier) way as well: If your property has appreciated 20% and it’s been two or more years since you bought it, you can have the mortgage insurance removed without having to refinance. “In our current economy, it’s probable that within two years, you should be in position to have 20% equity,” says Frank Fuentes, vice president of multicultural lending for New American Funding.

Combine the two above for max savings

The recent home value increases, combined with today’s lower interest rates, can give borrowers a double whammy in terms of savings, says Joe Tishkoff of Skyline Home Loans.

For example, if a home was purchased for $350,000 with 5% down, the borrower would have gotten a mortgage for $332,500.

A year and a half ago, interest rates were approximately 1% higher than they are now… plus, let’s say the home has appreciated in value and is now worth $385,000. A borrower would save approximately $350 to $375 a month by refinancing at today’s rates and by reducing or eliminating mortgage insurance commensurate with the home’s higher value. “That amounts to an 18% payment reduction, which buyers haven’t seen in the last decade,” Tishkoff points out.

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