Do you cringe at your calendar every month when the time comes to submit that mortgage payment?
The good news: There's plenty you can do to ease the payment burden - and refinancing is at the top of the list.
"It's amazing how many homeowners have not yet successfully refinanced despite the current low rates," says Michael Mullin, branch manager for First Priority Financial, Inc., a California-based lender. "Part of that is due to having no desire to jump into the process, but a larger part is a lack of knowledge of some of the special programs that are available for refinancing."
So if you're ready to start saving money on your mortgage payments, take a look at these simple tips to help you get started and the options that are available to you.
Tip #1: Don't Be Afraid to Refinance
Refinancing: The process of jumping into a new mortgage loan to replace the one you currently have. Doesn't sound easy, does it? It's not, but it's an option you should seriously consider.
Why? Because current interest rates are very low at the moment, and refinancing to a lower interest rate can save you hundreds of dollars a month, according to Philip D. Georgiades II, chief loan steward for VA Home Loan Centers. "Reducing the interest rate by just 1 percent can save many homeowners over $2,000 per year," Georgiades adds.
And with interest rates at an all-time low, it's also a good time for homeowners with an adjustable interest rate to switch to a fixed-rate mortgage, according to Ben Salem, the founder of REO For Nonprofit.org, which helps support homeowners facing foreclosure.
"In today's market, it's best to get a fixed rate because interest rates will probably go up in 2013," Salem says.
Expert Advice: If you do decide to refinance, try to lock it in during the middle of the week. Rates are usually lower on Tuesday, Wednesday, and Thursday when compared to the rates available on Friday or Monday, according to Georgiades.
Tip #2: Challenge a Bad Appraisal
If your home has been appraised for higher or lower than its real value, you might be paying for it - literally.
For example, if you live in an area with many homes in bad shape or with "For Sale" signs, your home value could be inadvertently lowered too, according to Gloria Shulman, founder of Centek Capital Group, a California-based lender. That's because appraisers look at the homes next to yours to determine how much your home is worth - which means you could end up with a low-ball appraisal, according to Shulman. And this is a problem because an undervalued home can mean a lower amount of equity in the home for you.
So what can you do to make sure you get an appraisal that is fair, based on your actual home value - and not just what other houses on your block look like? Get your own list of property values to compare. "You can acquire your own list of comparables at your local town hall, at your county office, and most importantly - through a good realtor," she says. You can then challenge the appraisal of your home.
But you could also find yourself in a situation where you would want to decrease the amount at which your home is valued. Why? Because if your home is appraised much higher than what it's really worth, you might end up with a huge property tax bill.
Expert Advice: Get a new appraisal to show that the current property tax rate doesn't match the property value. A new appraisal can cost you around $300, but it can be a worthy investment if it significantly changes the value of your home, according to Salem. "I have one client who bought a condo in Hollywood," says Salem. "She has challenged the $6,500 tax bill every year and enjoys a $1,300 yearly reduction - all because she was willing to challenge the county assessor."
Tip #3: Look to Government-Sponsored Plans
Are you ineligible to refinance because your mortgage is underwater? Consider taking advantage of the Making Home Affordable Plan (MHA), a program run by the Departments of the Treasury & Housing and Urban Development, which is designed to help homeowners who are struggling to make mortgage payments.
For example, if you don't qualify for refinancing because you owe more on your mortgage than your house is worth, MHA can help you refinance to a low rate, according to Rolando Moreno, vice president at First Equity Mortgage Bankers, Inc.
"A good candidate for the Making Home Affordable Plan would be someone who is up-to-date with their mortgage and whose property value has decreased," says Moreno.
In order to qualify for MHA, you must be employed and currently occupying your home as your primary residence. Your mortgage must also date back to on or before January 1, 2009, according to the MHA's official website.
Expert Advice: If you applied for a MHA plan in the past but were denied, apply again. "The program became much more liberal in October of 2012 and many applicants who have been denied in the past need to try again," says, Mullin.
Tip #4: Rent Out Extra Space in Your Home
If you have more house than you need, consider bringing a tenant or boarder in to help ease your mortgage expenses.
While most loans require that the home is owner-occupied (meaning you must still reside in the house), they do not restrict renting out extra rooms, according to Georgiades. So if you lease one room and charge $500 a month, for example, that's $500 less that has to come out of your own pocket to pay the mortgage.
Expert Advice: Before you decide to become a landlord, make sure you're staying in line with local zoning regulations. This means that if you have a residential mortgage, you can't rent out space to a commercial entity - like a small business, for example. Doing so could be a huge problem if you ever try to refinance or get a second loan, Mullin explains.
"I've seen rural properties that did not qualify for a home loan or refinance because the owner had decided to install a large barn and operate a commercial stable on the property," says Mullin.
- Mortgage Loans