How to Lower Your Mortgage Payment to Reduce Living Expenses

During economy crisis, many people may find it hard to maintain their ordinary lifestyles as they are facing lay-offs, pay cut and deteriorating business. When these happen, they have to find ways to reduce their living expenses. To most of them, the most burdening expenses could be the mortgage repayment.

 

One of the most effective way to reduce your living expenses is to lower your mortgage payment. There are a few methods you can consider as the solutions.

 

How to Lower Your Mortgage Payment to Reduce Living Expenses?

 

Interest-only Refinancing

Look for the interest-only refinancing where you can lower your mortgage payment to the minimum level. The disadvantage is when the loan period expires, your payment amount will increase significantly. Use this option when you do not expect your financial crisis to last long.


Extend the Term of Mortgage

For a mortgage amount of $150,000 at 6 percent interest for 20-year term, your monthly repayment amount is $1,074.65. If the term is extended to 25 years, the repayment amount will be reduced by $108.20. And will be reduced by 175.32 if extended to 30 years.

 

Ordinary Refinancing

This is the most common way to lower mortgage payment. For a $200,000 mortgage, amortized over 20 years, you may lower the monthly instalment by $112.95 when you refinance from the interest rate of 6 percent to 5 percent.

 

Refinance with Term Extension

You may refinance your current mortgage to the lower interest rate mortgage and extend the term at the same time. For a $200,000 mortgage, amortized over 20 years, the monthly repayment lowered from $1,432.86 to $1,073.64 when you refinance it from 6 percent to 5 percent interest rate and extend the term to 30 years. It lower your total mortgage payment by $359.22.

 

Downsize Your House or Consider Renting

When you can no longer afford your current home, the last solution could be to move on and look for the smaller and more affordable house. This should reduce your living expenses considerably, not only on the repayment amount, but also utilities and maintenance costs. If you cannot afford a house at all, then you should consider renting it. Wait until you are financially ready again to own your house.

More on Mortgage Loan