Author: Dan Rafter / Source: Wise Bread
Most of us don’t think too much about our mortgage lender once we’ve moved into our new home. We might complain about how much interest we’re paying on our mortgage each month, but that’s about as deep as it gets. This attitude, though, could be costing you money.
Your mortgage payment probably ranks as your biggest monthly expense. So why wouldn’t you reach out to your lender, at least occasionally, to see if you can somehow reduce it?
It makes sense to contact your mortgage lender at least once a year to ask about lowering your interest rate, adjusting the term of your loan, or maybe even refinancing into a different loan type. Doing so could save you a significant amount of money each year.
Here are five questions you should call and ask your mortgage lender each year.
1. Is there a way to lower your monthly payment?
Mortgage interest rates have been rising since the middle of 2017. But this doesn’t mean that the rate you have with your mortgage loan now is as low as it can ever be.
If you applied for your mortgage five or more years ago, was it at a time when you were saddled with thousands of dollars of credit card debt? Did you have late or missed payments on your credit reports? If your financial situation has improved since then, you might now qualify for a lower interest rate. And that lower rate will save you money on your monthly payment.
Consider this math: Say you are paying off a $200,000 30-year, fixed-rate mortgage with an interest rate of 5.
25 percent. Your monthly payment, not including taxes and homeowners’ insurance, will be about $1,104. If you now owe $180,000 on that same loan, moving to an interest rate of 4.25 percent would knock your monthly payment — again, not including taxes and insurance — down to about $885 a month. That’s a savings of about $219 a month.To get to that savings, you will have to refinance, replacing your existing loan with a new one with a lower interest rate. That will cost you some money upfront — often as much as $3,000 or more. But it’s worth it to call your mortgage lender. First, ask if you might now qualify for a lower interest rate. Then ask yourself if the monthly savings from the new rate will be high enough to justify the cost of paying for a refinance. (See also: How Long Does it Take Break Even With a Home ReFi?)
2. Can you refinance to a shorter loan?
Refinancing isn’t just a way to lower your monthly mortgage payment. You can also reduce the amount of interest you will pay over the life of your loan.
It’s no secret that a good chunk of your monthly mortgage payment goes toward interest. If you are paying off a $200,000 30-year, fixed-rate mortgage with an interest rate of 4.25 percent, you’ll pay…
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