Mortgages - 10 Steps to reducing monthly mortgages

Owning a home means money management and good sense. The first step is to sit down and take a hard look at your finances. Then decide to purchase a home where the down payment and mortgage will be what you can afford. Stay well within your means. If possible consult a finance professional and consider putting down a greater down payment.

Cost factors will include: total cost of home; maximum monthly housing cost (approximately 32% of your gross monthly income); and monthly debt load (not more than 40% of your gross monthly income). Try and keep the debt ratio as low as possible.

A reduced monthly mortgage payment is a dream come true for just about everyone. There are many ways in which one can do this:

• Since interest rates keep changing you would need to keep a track of changes and opt for refinance at a lower rate when the time is right. This would reduce your outlay considerably. Do the calculations to determine your savings after paying closing costs and other fees.

• Consider changing from a short term mortgage to a long term mortgage. This will tide you over the financial crunch and enable you to pay lower monthly payments. If your situation strengthens you could always foreclose the loan.

• Request for cancellation of the insurance you are paying to secure your mortgage. Once 20% of your loan is settled and you have established a good credit history ask the lender to wave payment towards the insurance. This will help reduce your monthly outlay.

• Find out where lower homeowner insurance rates are being offered. You will succeed in reducing your PITI payment, principal, interest, tax, and insurance payment.

• Check your calculations regularly make sure all adjustments are being made correctly.

• Choose a mortgage that offers a degree of flexibility. In this interest is paid only on the balance outstanding every day. This means you can pay off the mortgage in accordance to your earnings.

• Consider an accelerated equity plan or biweekly payments. This will reduce your burden quicker and yield big benefits.

• Study the details of your mortgage; find out what constitutes the principal and what the interest. Every month try and pay a little more than the amount due to be adjusted towards the principal. By reducing the principal you will save considerable outlay of funds as interest.

• Try variable interest or short term loans. Find out about ‘teaser rates”, loans which attract a lower interest for asset period.

• Consolidate your loans into a single loan with lower payments. Study all the loans, home, car, education, and so on. Make a table and analyze the outlay. Consult a mortgage specialist and find out what consolidation will mean and how much it will reduce your monthly payments by.

A home loan or mortgage is a debt that can be long term and a burden. Advisable is to pay off the mortgage as early as possible. Handle your finances wisely by keeping an eye on interest rates, insurance, and loan disbursements.