Try one or all of the following tips to reduce your monthly payment:
→ Choose the longest term possible. A 30-year fixed-rate loan will give you the lowest monthly payment when compared to shorter-term loans.
→ Make a bigger down payment. Your principal and interest payments will drop with a smaller loan amount, and you’ll reduce your PMI premium. With a 20% down payment, you’ll eliminate the need for PMI altogether.
→ Consider an adjustable-rate mortgage (ARM). If you only plan to live in your home for a few years, ask about an ARM loan. The initial rate is typically lower than fixed rates for a set time period; once the teaser rate period ends, the rate adjusts based on the ARM term you choose.
→ Shop for the best rate possible. LendingTree data show that comparing quotes from three to five lenders can save you big on your monthly payments and interest charges over your loan term.
Why your fixed-rate mortgage payment might go up
Even if you have a fixed-rate mortgage, there are some scenarios that could result in a higher payment:
- Property tax increases. Local and state governments may reassess the tax rate to pay for a variety of neighborhood needs, and a higher tax bill will increase your overall payment. Think the increase is unjustified? Check your local treasury or county tax assessors office to see if you’re eligible for a homestead exemption, which reduces your assessed value to keep your taxes affordable.
- Higher homeowners insurance premiums. Like any type of insurance product, homeowners insurance can, and often does, rise with time. Compare homeowners insurance companies if you’re not happy with the renewal rate you’re offered each year.