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Reduzca Sus Gastos al Refinanciar la Hipoteca

Reduce your Home Loan

by Anna Haug

If you've reduced as many of your expenses as you can to save money but are looking to save more money and you own your own home, have you considered looking at your mortgage? Payments on that loan are most likely your biggest monthly expense. You may consider doing something now while interest rates remain very low.

Here are ways to reduce your home loan expense:

Refinance

Refinancing at a lower rate can cut your monthly payments by hundreds of dollars. Refinancing a home loan is paying off the original mortgage and then applying for a new one with different terms with the same or different financial institution.

If you are thinking about refinancing your home mortgage loan, it's critical that you understand the average costs associated with refinancing, because this will help you determine whether or not to refinance your home loan.  Some things to think about are the length of time you plan on spending in your home, the cost of refinancing that the financial institution charges and what you might save in interest. 

For example, a $100,000 mortgage with a 5% interest rate you would be paying $537 in principal and interest monthly. By refinancing that same mortgage at a 3.92% interest rate your monthly payment would reduce to $472. Your monthly savings would be $65. However, it is important to remember the cost of refinancing which is usually about 3% of the loan amount. In our example, the cost would be about $3,000. It would take 4 years to break even on the amount paid on those closing costs.

Pay electronically

Many financial institutions offer an even lower rate if you set up automatic mortgage payments from your account. It's an easy step and one less check to write each month. To pay bills automatically, you will have to have a checking or savings account. To set up payment, you will need to give certain information to the institution that you you're your mortgage with, such as the account number and routing number of your financial institution. Also, it is important to make sure that there are funds in that account to cover the bill monthly.

Ask about fees

It is a good idea to ask the loan officers at your financial institution if lower fees are available on some mortgage costs. If you have good credit, the lender may even waive a few charges or offer lower charges. Some examples of fees charged are mortgage application fees, origination fees, attorney fees, appraisal fees along with several others.

Put the loan in one spouse's name

If either you or your spouse has a low credit score (a common indicator to determine borrower risk) or if one of you is self-employed with not much income, consider taking the loan out only in the name of the person with the higher credit score or with more income. You still can have both names on the title, but only one name on the loan.

Primate mortgage insurance (PMI)

Also, check what you're paying in private mortgage insurance (PMI), if you have to pay it. PMI is insurance that lenders require from most home buyers who obtain loans for more than 80% of their new home's value. The Homeowner's Protection Act of 1988 requires mortgage lenders or servicers to automatically cancel PMI coverage on most loans once you pay down the mortgage to 78% of the value and are current on your loan.

Talk to a loan officer at your credit union for help with these decisions.

Published 07-05-2012.

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