Save Money by Restructuring Your Mortgage

The cost of having a mortgage is the interest you pay on the principal over the life of the loan. If you are current on your mortgage, restructuring your loan can potentially save you thousands of dollars in mortgage interest.

An easy way to reduce the interest you pay is to add a little extra to your monthly mortgage payment. On a $200,000 loan with a 6% interest rate over 30 years, you could pay as little as $100 more per month and save more than $49,000 in interest over the duration of the loan. You would also be able to pay off the mortgage five months sooner than the due date.

You can accomplish the same interest savings if you simply split your monthly mortgage payment in half and pay it every two weeks. Think of it as a biweekly payment plan.

Another way you can have your loan restructured to better fit your budget is to request that the lender recast your mortgage to gain a lower monthly payment.

If you apply a minimum lump-sum payment of $5,000 towards your principal, your lender can reamortize the loan with the new reduced loan amount. The interest rate remains the same, but you will have lower monthly payments. The bank fees to recast your mortgage are just a few hundred dollars.

Refinancing is used most often to restructure a loan to save interest. A mortgage refinance replaces your existing loan with one that has a lower interest rate.

Using the example of a $200,000 loan with a 6% interest rate, a refinance to a 5% rate will reduce the monthly payments by $125. You will have to qualify for the new loan and expect to pay 3% to 6% of the new loan amount in closing costs.

Email or call me, and we can look at what restructuring option works best for you.

Tips for Creating a Financial Plan for Your Home

Your home is likely the biggest asset you own. Having a financial plan to manage it is recommended. If you have a plan, you will be better positioned to pay and plan for home improvements. A financial strategy will budget for paying the mortgage, taxes, insurance, upgrades and routine repairs and maintenance. The benefit to you will be that you know how much you have to spend and what you need to put aside for maintenance and any desired improvements.

By analyzing your cash flow, you may find that you can pay a little extra on your mortgage every month, enabling you to pay down your loan faster. If you have a loan, you will need to have insurance. Be sure your insurance portfolio includes not only basic coverage but also liability coverage to protect from lawsuits. Make sure your insurance planning includes additional policies for natural disasters.

Property taxes will always be part of your financial plan, so keep track of how much they have crept up over past years and budget accordingly. Be aware that your tax obligation can possibly be reduced if recent sales show diminished value. Challenge your assessment.

Budget for maintenance and improvements. Your best ally will be the home inspection report you received when you bought your home. Be prepared to spend 1% to 3% of your home’s value every year on maintenance. A successful plan may yield extra funds for improvements.

Give me a call, and I will help you look at the total picture of the cost of home ownership to help create your financial plan.