How to Shrink Your Mortgage

For most people their mortgage payments are the bulk of their bill paying. However, this doesn't mean you shouldn't have to pay a lower monthly payment. Paying for a mortgage is not like buying a pair of shoes. With mortgages, there are variables and flexibilities not found in other places. Here are five steps you can take to shrink your mortgage.

Difficulty: Easy

Instructions

1. Put your business up for bid. Have lenders compete for your business. Don't be shy about telling one lender what another offered you. Oftentimes they will match or beat an interest rate. By paying a lower interest rate, you will lower your monthly payment and gain some breathing room.

2. Look into an adjustable-rate mortgage (ARM). If your bottom line is decreasing your mortgage payment, this is a tempting option. With an ARM, your initial interest rate will be very low, many times lower than a fixed rate. But the interest rate will adjust after several years. Research this option thoroughly, as some find it difficult to handle once the rates change.

3. Pay more than the principal on your monthly bill. While this sounds contradictory, it will help pay off your mortgage insurance faster, which will ultimately lead to a lower mortgage.

4. Refinance your mortgage while rates are low. By reapplying your mortgage to a lower interest rate, you will have to pay closing costs again. However, in the long term, you will be paying less per month, and the savings should balance out.

5. Downsize your home. While this may not be the most exciting prospect, studies have shown that most Americans live in a home that is bigger than their needs. By choosing a smaller home and selling your current one, you can dramatically lower your mortgage.

Tips & Warnings

• While everyone wants a lower payment, a person can do serious financial damage to themselves and their family by negligently changing their mortgage.