How to Effectively Manage a Mortgage and Insurance Payment
When you take on your first home mortgage, you may feel overwhelmed by the amount of money you owe, and the length of time for which you may owe it.
However, managing your mortgage is simply a matter of paying attention to details and taking steps to maximize your home investment.
Get to Know Your Mortgage Statement
Make a point of becoming familiar with the computerized statement and the items listed there.
Be alert to any mistakes in your mortgage payment amount, interest rate, or escrow payments.
Remember that your homeowners insurance is generally included in your escrow account.
You may wish to periodically get quotes on your insurance to reduce your mortgage payment. Make sure that your insurance is paid before the due date, to ensure you have coverage when you need it.
Check to See If You Carry Private Mortgage Insurance
If you borrowed more than 80 percent of the value of your property, you might have been required to carry private mortgage insurance, or PMI, to secure the financial institution’s risk.
This additional cost can add several hundred dollars to your mortgage payment. To eliminate the need for the PMI insurance, you will have to ensure that your loan obligation is less than 80 percent of the value, which may mean paying more toward the principal balance or acquiring property assessment.
Doing so will help you get a better interest rate when you refinance and a lower monthly payment each month.
Keep an Eye on Interest Rates
If interest rates drop significantly, you may be able to refinance your home at a lower price.
When the mortgage rate drops 2 percent, it’s time to think about refinancing to lower your monthly payment.
You can also use the drop-in rates to shorten your mortgage term to pay it off more quickly.
If you have an adjustable-rate mortgage, it may be in your interest to refinance to a fixed-term loan.
You can also use a refinance to take out equity for children’s college or other essential expenses.
Be Prepared for Interest Rate Adjustments
If you have an adjustable-rate mortgage, you will be subject to periodic rises in your interest rate that will increase your payments.
Make sure you are aware when these changes are scheduled so that you can take action to prepare.
You may wish to refinance your mortgage to a fixed-rate loan, or you may need to aggressively cut your expenses or save money to cover the increased payments.
The equity that your regular payments accrue can be a stepping-stone to other investments you might make, such as starting a business, educating your children, or purchasing a rental property.
If you follow these steps, you will be able to manage your payment effectively, so it will give you the freedom to invest in other areas of your life.
Category: Mortgage
