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Focus on the “big wins” rather than the small ones to save more in 2021. (iStock)
Inevitably at the end of the year and after an exciting vacation period, the collective American conscience turns to save money.
Many consumers are focusing on micro-adjustments in order to put more money back into the monthly household budget: skip the latte, cut down on subscription services, and plan more meals at home. While these smart measures save money, it’s actually the macroeconomic adjustments that make the most substantial difference.
A great way to save is to cut down on your biggest expenses, especially monthly mortgage payments. There is one thing you can do right now and notice results fast. Here’s what you need to know.
How can I reduce my monthly mortgage payment?
Due to the effect of the coronavirus pandemic on the US economy, interest rates are still at historically low levels. This means that homeowners who refinance in the next few months can shave hundreds of dollars off their monthly payment and effortlessly put more money back in their pocket each month, with no coupons.
Want to see current mortgage refinancing rates? Visit Credible to explore multiple rates and lenders in minutes.
For first-time refinancers, there are many online mortgage calculators that can quickly illustrate the real numbers of how much money you could be leaving on the table by not refinancing.
For example, suppose you bought a house in 2016 and wanted to refinance $ 300,000 into another 30-year fixed rate mortgage. The mortgage rate you received in 2016 was pretty good at 3.75%, but you are now eligible for 2.75%. This difference of just 1% saves $ 263 on the loan each month and almost $ 15,000 over the life of the mortgage.
To understand how much you could save on monthly mortgage payments by refinancing now, calculate the numbers and compare rates using Credible’s free online tool. Within minutes, you can see what many mortgage lenders are offering.
It is important to include all closing costs in your calculations, as this will have an impact when the new loan “hits the breakeven point” and the real savings can begin. The calculator we recommend here takes these closing costs into account so consumers can weigh the true cost-benefit ratio when evaluating mortgage options.
WHY IT’S A GOOD IDEA TO REFIN YOUR MORTGAGE WHILE RATES ARE LOW
What about unfavorable market charges?
To recap: In December 2020, in response to peak refinancing, the Federal Housing Finance Agency began adding an “unfavorable market commission” of 0.5% to all treaty refinance loans over $ 125,000 sold. to Fannie Mae and Freddie Mac. As the biggest buyers in the secondary mortgage market, over 70% of mortgages are sold to Fannie Mae and Freddie Mac every year, which means every homebuyer should watch these fees, even if you aren’t. sure what will happen once you close. on the mortgage.
With unfavorable market charges, every $ 100,000 of refinanced money will cost $ 500 more. However, if the difference between your initial rate and the rate you are currently receiving is large enough, it could offset unfavorable market charges and more. This is why it is important to shop around for several lenders with Credible, speak to a loan specialist, and perform savings calculations accurately.
“Is this a good time to refinance anyway? Yes. Mortgage rates are very low right now, even with the unfavorable market charges built in, ”advises Casey Fleming, mortgage advisor from Silicon Valley, Calif., And author of“ The Loan Guide: How to Get the Best Possible Mortgage ”. “If you can save the money, don’t let unfavorable market charges stop you from doing it.”
With Credible, you can get a full idea of the impact these new refinancing fees could have on you and your personal finances. Crunch the numbers with Credible’s free online tools today to find out.
WHO IS EXEMPT FROM THE NEW MORTGAGE REFINANCE FEES?
Other ways to lower your mortgage payment
If refinancing isn’t the best option for you right now, there are several other ways to lower your monthly mortgage payment:
- Rent rooms in your home to long-term tenants.
- Consider listing the house on Airbnb.
- Sell your current home. A move in the next few months would qualify you for a new mortgage at historically low interest rates.
- When you buy a new home, put in more money to reduce the amount you pay each month.
- Consolidate your debts into a low interest personal loan. With the additional savings each month, you can invest more in your mortgage or increase your emergency savings.
Find out what type of personal loan rate you qualify for today to see if it’s right for you.
EVERYTHING YOU NEED TO KNOW ABOUT PERSONAL LOANS
Reducing your monthly housing payment has a big financial impact. If the above ideas don’t sound appealing, refinancing can often be the fastest way to save money, provided you find the right rate and the right lender. Explore the refinancing options available in minutes by visiting Credible.
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