Ways to make mortgage payments more manageable: Bi-weekly payments; property tax
HOUSTON - The Mortgage Bankers Association says delinquencies on mortgage loans increased last quarter to a rate of 3.88%, as people continue to struggle with the high cost of living.
For many homeowners, the mortgage is the biggest bill you pay. And many recent homebuyers are paying much higher interest rates, to boot.
Lending experts say there are a few strategies to help homeowners make their mortgage payments a little more manageable.
One tip is to split a monthly payment into two bi-weekly payments.
You'll pay a total of 26 payments a year, which amounts to an extra payment each year. That can shave four to five years off the length of the loan and reduce the total interest you'll pay over the term of the loan. It also can help to make that large monthly payment a little easier by spreading it out over time.
Check to see if your lender accepts bi-weekly payments before making any change in payment.
This move can also help some homeowners who pay for PMI, Private Mortgage Insurance. By paying more payments sooner, you may meet the required equity sooner to be able to cancel PMI.
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While we're talking PMI, if your home's value went up considerably in the recent real estate boom, lenders say you may qualify sooner to stop paying for PMI as well.
Another tip: double-check the due date of your mortgage payment. Lending experts say many homeowners assume it's due by the first of the month. But it may be set for a later date, depending on your date of closing, such as the 15th. That could buy you more time to pay.
And here's more potential savings: If you pre-pay your property taxes and homeowner's insurance into an escrow account with your mortgage, talk to your lender about the recent property tax cut.
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In November, Texas voters passed a property tax cut that Lt. Governor Dan Patrick says could save the owners of an average $300,000 home about $1,200 to $1,400 a year.
Many lenders perform an annual analysis of escrow accounts. Overpayment of money for taxes can be returned to the homeowner or applied to the next year's payments. But homeowners can ask for this analysis to be performed sooner, which could result in reducing your payment or a possible refund.
Lastly, if you fear you will miss a mortgage payment, talk to your lender beforehand. They may be able to help with forbearance or a mortgage modification.