Focus on “big wins” instead of small ones to save more in 2021. (iStock)
Inevitably, at the end of the year and after a long period of holidays, the American collective conscience begins to save money.
Many consumers focus on micro-adjustments to put more money back into the monthly family budget: skipping coffee with milk, cutting subscription services and planning more meals at home. While these smart moves save money, it’s actually macro adjustments that make the most substantial difference.
A great way to save is by reducing your biggest expenses – especially your monthly mortgage payments. There is one thing you can do now and see quick results. Here’s what you need to know.
How can I lower the monthly mortgage payment?
Due to the effect of the coronavirus pandemic on the United States economy, interest rates are still at record levels. This means that homeowners who refinance in the coming months can save hundreds of their monthly payment and effortlessly put more money back in their pocket each month, without the need for coupons.
Interested in seeing current mortgage refinancing rates? Visit Credible to explore various rates and creditors in minutes.
For novice refinancers, there are many mortgage calculators online that can quickly illustrate the real numbers of how much money you could be leaving on the table for not refinancing.
For example, let’s say you bought a home in 2016 and want to refinance $ 300,000 for another 30-year fixed-rate mortgage. The mortgage rate you received in 2016 was very good, 3.75%, but now you qualify for 2.75%. This difference of just 1% saves $ 263 in the loan each month and about $ 15,000 in the life of the mortgage.
To understand how much you could save on your monthly mortgage payment by refinancing now, analyze the numbers and compare rates using Credible’s free online tool. In minutes, you can see what several mortgage lenders are offering.
It is important to include any closing costs in your calculations, as this will have an impact when the new loan “hits balance” and the real economy begins. The calculator we recommend here takes these closing costs into account so that consumers can weigh the real cost-benefit when evaluating mortgage options.
WHY IT’S A GOOD IDEA TO REFINANCE YOUR MORTGAGE WHILE RATES ARE LOW
What about the adverse market rate?
To recap: in December 2020, in response to the refinancing spike, the Federal Housing Finance Agency began adding a 0.5% “adverse market rate” to all convention refinancing loans over $ 125,000 sold to Fannie Mae and Freddie Mac. As the biggest buyers in the secondary mortgage market, more than 70% of mortgages are sold to Fannie Mae and Freddie Mac each year, which means that every home buyer should look at that rate, even if you you are not sure what will happen when you close on the mortgage loan.
With the adverse market rate, each $ 100,000 of refinanced money will cost an additional $ 500. Still, if the difference between your original rate and the rate you currently receive is large enough, it could offset the adverse market rate and a few more. That is why it is important to buy several creditors with Credible, speak to a loan specialist and perform savings calculations accurately.
“Is it a good time to refinance anyway? Yes. Mortgage rates are very low now, even with the adverse market rate built in, ”advises Casey Fleming, mortgage consultant in Silicon Valley, CA, and author of“ The Loan Guide: How to Get the Best Possible Mortgage ”. “If you can save money, don’t let the adverse market rate stop you from doing so.”
With Credible, you can get a complete picture of how much this new refinancing rate can impact you and your personal finances. Calculate the numbers with Credible’s free online tools today to find out.
WHO IS EXEMPT FROM THE NEW MORTGAGE REFINANCE FEE?
Other ways to lower your mortgage payment
If refinancing is not the best option for you today, there are several other ways to reduce your monthly mortgage payment:
- Rent rooms in your home to long-term tenants.
- Consider listing the home on Airbnb.
- Sell your current home. Moving in the coming months would qualify you for a new mortgage with record low interest rates.
- When buying a new home, spend more money to lower the amount you pay each month.
- Consolidate debt with a lower interest personal loan. With the extra savings each month, you can invest more in your mortgage or to increase emergency savings.
See what kind of personal loan rates you qualify for today to see if it makes sense to you.
EVERYTHING YOU NEED TO KNOW ABOUT PERSONAL LOANS
Reducing monthly housing payments has a major financial impact. If the ideas above don’t seem appealing, refinancing can often be the quickest way to save, as long as you find the right rate and creditor. Investigate the refinancing options available in minutes by visiting Credible.