Mortgage payment is a touchy topic because there are a lot of people who are having problems with it. This can stem anywhere from their inability to meet their current monthly payment which can result to delinquency or default to being disapproved for a loan application. Getting a house of their own remains to be an American dream.
There are signs that you are not yet ready for a mortgage loan such as a low income or worse, low credit score. Either of these can really lower your chances of getting a mortgage loan and you should think about it. Yes having a house is nice but if you cannot meet the monthly payments, the bank will just take back the house and all the past payments you have made.
When you get your finances in order and improve in your score as well as increase your salary, the time will come that you can get an approval on that loan. Once you get your lender’s nod, you’re set and you get to move in to your new home. The challenge now shifts from being approved for the mortgage loan to meeting mortgage payment.
Nerdwallet.com shares that an average mortgage loan debt is at about $156,000 per family. That usually stays on top of the household budget for both the biggest balance and biggest monthly payment. If you have been approved for a mortgage loan, this is just the start of your journey of slowly paying for your house to be able to call it your own.
Paying down your house loan
It is exciting to finally be approved for the mortgage loan and start putting together the papers for the house. You then look for movers to bring in all your stuff from the old probably rented place to the new one. And this excitement can probably give you an adrenaline high that you sometimes overlook some of the basic facts of owning a house.
The Federal Reserve website shares that the default statistics for mortgage loans is at 4.3%. This is the percentage of homeowners who are unable to pay for their house loans anymore. They are also at serious risks of losing the house in foreclosure. Not to mention that their credit score would have plummeted down already due to non-payment on the house.
If you are already at the stage of making house payments and looking for ways to expedite them, here are three ways to speed up and pay off your loan faster.
- Refinance but make the same payment amount. When you can no longer afford your home payment, one of the first things you think about is refinancing your loan to make lower payments. But this only works when you have improved your credit score and your lender lowers your interest rate. But you can actually use this top save on interest payment and pull your pay-off date much closer even if you are still able to make the payments. If your credit score improves, there is a big chance that your interest rate can lower down to what it was the first time you took out the loan. Lower interest rate means lower monthly payment but if you stick to the original amount, you are essentially making extra payments every month. Continue refinancing when your score improves and see your rate go down.
- Make extra payment against the principal. This is one of the best things you can do to step up your payments and be done with your mortgage loan faster that the original payment timeframe. You need to understand first how dependent the interest is on the principal amount. Take for example a 4% rate and you borrowed $100,000. This means $4,000 interest payment but if the principal was down to say half at $50,000. That would put the interest payment at $2,000 for the same interest rate.
- Hybrid approach. A lot of people could be too quick to point out that too much of a good thing spells trouble but when it comes to mortgage payment, there are a few things you can put together. The first two ways to help with house payments are great on their own but if you can combine them, they can do greater wonders for your budget. Refinancing when your score has improved can lower down your interest rate and if make extra principal payments, it further lowers your monthly payment.
- Make extra monthly payments. This is probably the simplest and at the same time the hardest one to do. It is simply making two payments a month indicating that the second one is a monthly payment and not a principal payment. This is challenging because you are doubling your mortgage payment every month. This is not a problem if you have more than enough lying around your finances but you need to remember that your house payment is usually the biggest one you make every month. If you are cutting a cheque for $950/month for the house then you will be making $1900 to make this work. The upside to this is that you get to cut down in half the amount of time you need to pay off the house.
How to squeeze in more for house payments
A recent NYPost.com is just heartbreaking as it shows how some full time NY government workers are homeless because they just don’t have enough for a house. Here are some of the ways to be able to squeeze in a few more bucks that can hopefully get you to make your mortgage payment.
- Review your budget. Your primary objective is look at your expenses and see if there are any expense accounts that you can do away with or at least lower down. You need to take control of your household budget to make sure that you do not get blindsided with unnecessary payments. This allows you to be in control on how you handle your money and use your funds accordingly.
- Renegotiate premium payments. You might want to pick up your phone and call your insurance companies to see if there is anyway to lower down premium payments. But you might want to compare prices before calling so have an idea on how much you might be able to get based on other company’s quotations. If your insurance company agrees to lower down your premium payment whether for your car or your house, then you get to save a few extra dollars for mortgage payment.
- Look for ways to increase income. It might be challenging to begin with but once you see the value of an additional income every month, it might even pave the way for a difference career or hobby. You can try to be an Uber driver on weekends or even do a photography stint after office hours. You might want to try baking for family and friends and later get them to recommend you to people they know.
Your mortgage payment usually has the lowest interest rate among all your loan and debt payments so there is no urgency in the payment. But there is no harm in trying to pay off as soon as possible and that is not impossible. There are ways to fast track that payment so you can enjoy full ownership of your house.