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Old 02-04-2016, 05:22 PM
 
Location: San Antonio/Houston
33,596 posts, read 51,807,704 times
Reputation: 83055

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Ooooops.... you right!!! I am not sure why I got it wrong...

There are several ways you can try:
- see if you can get rid of the PMI - as soon as your mortgage balance falls below 80% of the home's appraised value
- try to reduce your tax assessment, How to Reduce Your Property Taxes-Kiplinger
- find out if you can modify your loan (check for eligibility: https://www.makinghomeaffordable.gov...gram-hamp.aspx),
- refinance to lower interest rate - https://www.zillow.com/mortgage-rate...-site-zblog%7D

Also try to improve your budget
Monthly Budget Spreadsheets

Good luck!!!!
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Old 02-04-2016, 07:35 PM
 
10,711 posts, read 20,133,318 times
Reputation: 9859
If you have a HELOC available, a case can be made for taking out a HELOC loan even if at a higher interest rate, to pay down the mortgage. It's kinda complicated but does actually work, but you absolutely must be disciplined and also must have a positive monthly cash flow. This assumes you want to pay off the house, not reduce the monthly cost of it and stretch it out longer.
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Old 02-04-2016, 08:06 PM
 
12,404 posts, read 9,206,608 times
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Quote:
Originally Posted by wheelsup View Post
If you have a HELOC available, a case can be made for taking out a HELOC loan even if at a higher interest rate, to pay down the mortgage. It's kinda complicated but does actually work, but you absolutely must be disciplined and also must have a positive monthly cash flow. This assumes you want to pay off the house, not reduce the monthly cost of it and stretch it out longer.
Actually, it is for the UNdisciplined. The disciplined would throw the same amount each month at the 1st mortgage that they otherwise would have paid to the 1st + 2nd. This will pay it off faster because you aren't wasting money by borrowing at a higher rate to pay down debt at a lower one.
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Old 02-04-2016, 09:04 PM
 
10,711 posts, read 20,133,318 times
Reputation: 9859
Quote:
Originally Posted by ncole1 View Post
Actually, it is for the UNdisciplined. The disciplined would throw the same amount each month at the 1st mortgage that they otherwise would have paid to the 1st + 2nd. This will pay it off faster because you aren't wasting money by borrowing at a higher rate to pay down debt at a lower one.
No that isn't correct. The difference is in how the interest on the home mortgage is calculated (monthly) vs the HELOC (daily).

In simplified terms:

If you pre-pay an extra say $5k on the mortgage on the 1st but take out a HELOC to pay it, and pay off the HELOC at the end of the month, your average daily balance was roughly $2500 (assuming equally spaced pay checks) which is really what you'd pay interest on.

In reality you'd most likely be taking out a larger HELOC but the concept is the same. Hence why it's for very disciplined people. There is temptation to use the HELOC on fun stuff vs. paying down the mortgage.

Another way would be if you can use a credit card to pre pay, and pay it all off by the end of the cycle. This effectively gives you a 0% loan. Interesting stuff. To be fair, it made a lot more sense to get funky when rates were 6%, not 3%.

Last edited by wheelsup; 02-04-2016 at 09:16 PM..
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Old 02-05-2016, 01:31 PM
 
1,066 posts, read 707,616 times
Reputation: 1199
Look at a no fee refinance. Rates are low. If your family has a rate above 4.5% they might be able to get a no fee refinance below that rate. (if rates are standard 3.75% a no fee rate will be 4.125% since youre not paying up front). If they're 25 years into a mortgage you could consider going back to a 30 year mortgage. This will lower the monthly payments, give you a lower interest rate.. but over the long term will cost you more unless you start making extra payments to the mortgage to pay it off faster one day.

Each persons situation is different, you need to look at whats best for your family now and in the future.
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Old 02-05-2016, 02:30 PM
 
12,404 posts, read 9,206,608 times
Reputation: 8863
Quote:
Originally Posted by wheelsup View Post
No that isn't correct. The difference is in how the interest on the home mortgage is calculated (monthly) vs the HELOC (daily).

In simplified terms:

If you pre-pay an extra say $5k on the mortgage on the 1st but take out a HELOC to pay it, and pay off the HELOC at the end of the month, your average daily balance was roughly $2500 (assuming equally spaced pay checks) which is really what you'd pay interest on.
In this case, though, even without the HELOC you could have paid down that $2500 directly to the mortgage at the time of that first check, and the other $2500 at the time of the second check. The benefit of this depends on whether you have a simple interest mortgage or a monthly compounding mortgage. In that latter case the question is when the cutoff occurs for an extra principal payment to "count" in the current/next period interest calculation.

At any rate the majority of people advocating this sort of strategy say to borrow several months of surplus cash flow on the HELOC. This does not make sense unless unless the HELOC has a lower rate than the 1st mortgage.

Quote:
Originally Posted by wheelsup View Post
In reality you'd most likely be taking out a larger HELOC but the concept is the same. Hence why it's for very disciplined people. There is temptation to use the HELOC on fun stuff vs. paying down the mortgage.

Another way would be if you can use a credit card to pre pay, and pay it all off by the end of the cycle. This effectively gives you a 0% loan. Interesting stuff. To be fair, it made a lot more sense to get funky when rates were 6%, not 3%.
Sure. One opportunity does come up, however, if one has the cash saved to buy a car and then gets offered 0% or 0.9% financing. Then take the loan and throw the "car fund" cash straight to the mortgage principal. In this case, you get to keep that low-rate debt for several years!
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Old 02-05-2016, 07:34 PM
 
Location: North Idaho
21,006 posts, read 25,781,024 times
Reputation: 39395
Reduce the size of the payments? If it is possible, refinance for a lower interest rate or stretch out the payments over more time.

Seriously, though, if the payments are too big to manage, sell that place and buy a smaller cheaper place.
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Old 02-11-2016, 06:23 AM
 
1,807 posts, read 2,329,433 times
Reputation: 4107
Quote:
Originally Posted by sj08054 View Post
Maybe I am the only one reading this differently. I am under the impression that OP is looking to reduce the monthly mortgage payment. If that is the case, refinancing my help.


Is the monthly payment increasing because of other increasing cost (escrow) from the original loan or is there a reduction in income?
Good point! There really isn't a way to reduce your monthly payment other than refinancing. Taxes and insurance do not typically go down. P&I is set for the life of the loan. You could consider upping your deductible on insurance, but that could backfire if you have a qualifying event.
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Old 02-11-2016, 06:28 AM
 
1,807 posts, read 2,329,433 times
Reputation: 4107
Quote:
Originally Posted by elnina View Post
Ooooops.... you right!!! I am not sure why I got it wrong...

There are several ways you can try:
- see if you can get rid of the PMI - as soon as your mortgage balance falls below 80% of the home's appraised value
- try to reduce your tax assessment, How to Reduce Your Property Taxes-Kiplinger
- find out if you can modify your loan (check for eligibility: https://www.makinghomeaffordable.gov...gram-hamp.aspx),
- refinance to lower interest rate - https://www.zillow.com/mortgage-rate...-site-zblog%7D

Also try to improve your budget
Monthly Budget Spreadsheets

Good luck!!!!
Yes, these are some other options - especially the PMI. That is a big one. You're basically just throwing ,PMI ey away, as you get zero benefit from it. It is strictly for the lender's benefit.

The other option is to cut costs in other areas. It is going to be difficult, in most cases, to lower your mortgage payment.
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Old 02-13-2016, 10:27 AM
 
Location: San Francisco Bay Area
11,420 posts, read 13,967,393 times
Reputation: 10932
I pay 26 payments a year and add a few hundred to each payment. I've used a mortgage calculator to calculate my interest and time savings and my 30 year mortgage will go down to 23 years.
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