Today's Economy: How to Lower Monthly Mortgage Payments

Posted by Justin Havre. on Wednesday, November 25th, 2015 at 1:21pm.


With continued layoffs and job losses in oil and gas, and its associated industries, more people are looking to reduce costs.  Your monthly mortgage payment can be reduced, especially if your financial situation has changed or grown worse since you took out a mortgage.  There are a few options to look at which your lender may be only too happy to discuss with you.

Refinance at a lower interest rate

We’ve come a long, long way since the days of 16% interest on mortgages.  Examine your current interest rate and see if it is possible, or even feasible, to find a lower rate.  If you have purchased your home recently, you may not be able to go lower than you already are.  A lower rate may have great impact on your monthly outgoings, as long as the cost of switching the rate offsets any penalties you might incur or fees you may have to pay.   If you can take care of the refinancing costs in short order, you’ll be able to reap the benefits of lower monthly payments sooner. Consult a professional before doing this as there may be some complex aspects to refinancing that you need to be aware of upfront.

Extend the term

One of the easiest things to do when trying to reduce your monthly payments is to make the term of your mortgage longer.  Can you go from 25 to 30 years?  In the long run, this will add extra interest and cost you more, but if the short term is what you’re worried about you can ease your monthly financial burden and increase your payments in the future, when you’re less stressed and cash is more abundant.

Organize and consolidate debt

Rare is the family without some kind of debt.  Do you have outstanding debt from many sources, such as credit cards or a loan that is not associated with your home? Talk to your lender or banker about a debt consolidation mortgage loan.  By taking action and boiling your debt down to just one monthly payment, you’ll avoid high interest rates changed by credit card companies as consolidation loans are available at much lower interest.

Lower insurance rates

If you’re carrying a high principal on your mortgage, you likely have mortgage insurance. The cost can be built into your single payment, which also includes interest and often, property taxes.  Shop around for mortgage insurance with lower monthly premiums and while you’re at it, check out your home owner’s insurance.  You want to be covered but you want to be paying the best possible rate.

Get off the TIPP program

Everyone has to pay property tax – there’s no getting around it.   If you’re on the City of Calgary’s TIPP program, which may have been set up by your mortgage lender, your annual property tax has been allocated into monthly installments that are part of your monthly payment. This program is voluntary, and you can opt out of it at any time.  This can cut $200 or more off your monthly payment, but bear in mind you will need to pay your taxes in full come June 30 of the next year.  It’s a very short term solution.

Consider downsizing or renting out a room

Don’t despair if the above measures won’t work to reduce your monthly mortgage payment.  You could consider moving to a smaller, less expensive home.  It could be a last ditch effort should foreclosure ever loom.  A more immediate less drastic solution could be to sublet a portion of your home or even just a room to a student or young person.  

Discuss your needs with your lender or a professional mortgage broker and see what course of action works best for you.

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