Although the economy has been rough over the past year, you may find the benefit of lowering your monthly house payment.  I'm not referring to the nasty ARM payments that have sent this market tumbling in the first place, but rather 2 simple techniques that will lower your monthly house payment at a fixed rate, and keep it there throughout the life of the loan.

1.  If it's been several years since you bought your house, it may be a good time to refinance.  Interest rates have dropped sharply in the past few years, so it  may be a great time to refinance your house.  Keep in mind that your current credit score will still be a factor.  Also, you need to be aware of the different types of mortgages that are currently on the market, as getting the wrong one could actually make situations worse in the long run.  Naturally, finance charges may apply, even if you refinance with your current lender.

 

2.  Try to get rid of your private mortgage insurance (PMI).  If you bought your house with less than a 20% down payment, your bank probably required you to have private mortgage insurance.  This insurance is paid by the homeowner.  If the owner ever defaults on the house payment, the bank will receive the money from the insurance, as it tries to foreclose on the homeowner.  It is of no benefit to the homeowner after the house has been purchased.

 

If you have 20% equity in your current home and have a conventional home loan, you can get rid of your mortgage insurance.  In order to qualify, you may have to hire a home inspector to give an estimate of how much your house is worth.  Once you have your home inspected and you have verified that you already have 20% of your houses value paid for, the home inspector then can create an estimate for your lender.  Contact your lender to have the insurance removed. 

 

Typically, in a regular economy, you should have 20% equity in your house within the first 5-6 years.  As you pay down your loan, your house property value goes up.  When you talk about houses normally rising  in value 3% a year exponentially, you will reach your 20% equity in the first 5-6 years.

 

Since the market has plummeted in the past year, you may find that your house value has decreased, so that you will only be able to refinance your house.  If at all possible, avoid using a FHA loan, as one of the drawbacks to this is that you will be responsible for maintaining your mortgage insurance throughout the life of the loan, not just the first 20%.