10 Ways to Lower Your Mortgage Payment

10 Ways to Lower Your Mortgage Payment

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A high mortgage payment can account for a large majority of your income, leaving you with very little to cover the rest of your regular living expenses each month. It's best to keep your mortgage costs low and under 30 percent of your take home income so you won't feel a financial strain each month. If you're wondering how to lower your mortgage payments each month, there is more than one way to achieve that goal.



If you feel like your monthly mortgage is too high, here are 10 ways to reduce your mortgage.

1. Extend Your Repayment Term
A simple way to lower your mortgage payment is to extend your term (which is also referred to as re-casting or re-amortizing) if you can. You don't even need to refinance your mortgage to do this because most lenders will simply offer this service for a fee of about $250.

If you extend your 15- or 30-year mortgage to a 40-year mortgage, your monthly mortgage payment will decrease since you have more time to pay back your loan by stretching out the term. While you may pay more interest on your mortgage over time with this option, it's best for borrowers who need an immediate solution and may consider refinancing their mortgage in the future.

2. Refinance Your Mortgage
If you do choose to refinance your mortgage, it is one of the best ways to help ensure you lower your mortgage payment and your interest rate so you can pay less in interest over the life of your loan. You must have good credit to refinance, but you can utilize our refinance calculator to estimate how much you can save and how your mortgage payment would be decreased by.

3. Make a Larger Down Payment
If you are still in the market for a home, consider putting a large down payment down in order to keep your monthly mortgage low. While it's best to put at least 20 percent down, if you aren't in an immediate hurry to buy, see if you can set aside even more.

The more you put down on your home, the lower your mortgage will be. And if you put at least 20 percent down, you won't have to pay private mortgage insurance which will save you quite a bit of money as well.

4. Get Rid of Your PMI
If you bought your house and put down less than 20 percent of the purchase price as a down payment, you are probably paying mortgage insurance on top of your regular mortgage payment which can add tens or even hundreds of thousands of dollars to the overall cost of your home loan.

The good news, however, is that you can get rid of PMI. First, you have to repay enough of your mortgage so that you gain at least 20 percent equity in your home. Then, you can request your lender drop your PMI. Your lender may send an appraiser to your property to verify how much equity you have in your home before getting rid of the PMI, but either way if it is removed, your mortgage payment will be lowered.

5. Have Your Home's Tax Assessment Redone
If your home loan has an escrow, property taxes may take up a noticeable chunk of your mortgage payment each month. Property taxes are based on each county's tax assessment of how much your home or land are worth. Some homes in urban areas are overvalued causing the taxes to be high. The assessment is different from an appraisal since it is conducted by your county for tax purposes only.

As a homeowner, you can request to have the assessment done again or protest it by filing with your county and requesting a hearing with the State Board of Equalization. If the protest is approved, your homeowner's taxes will decrease along with your monthly mortgage payment.

6. Make Extra Payments Toward the Principle
If you'd rather see your mortgage payments decrease later instead of instantly, you should actually consider making extra payments on your mortgage each month. Like with all debt that has an interest rate, the more you put toward the principal balance, the sooner you pay the debt off and in the meantime, your extra payments can help reduce what you owe in the future.

If you can manage to make double payments each month for a year, you'll reduce the principle balance of your loan, pay less in interest, and possibly gain more equity in your home so you can drop PMI if you have it.

Making extra payments isn't always easy, but if you have a dual-income household, or receive any gift money or bonuses at work, you can certainly try to achieve that goal.

7. Choose an Interest-Only Mortgage
When you get a mortgage, some lenders don't require you to begin paying off your balance right away and will offer you an interest-only loan. Interest-only (I/O) mortgages occur in two stages: the first phase, where you only pay the interest on your mortgage and the second phase, where you pay off the actual principal balance plus interest.

If you have a 30-year mortgage and spend the first five years paying only interest, your monthly payment may seem pretty low, but you must pay off the rest of your mortgage in the remaining 25 years. I/O mortgages are a temporary way to lower your mortgage payments and can work out as long as you plan to increase your payments after the interest only phase is up.

8. Pay Your PMI Upfront
When you close on your home, you'll have the option to pay your private mortgage insurance upfront if you didn't put 20 percent down. Instead of having to pay extra on your mortgage year after year, you can just take care of PMI by paying a one-time fee.

This is why it's important to budget for extra expenses associated with buying a home and have plenty of savings set aside so you can make money-saving decisions like this. You may not have enough in your bank account to make a 20 percent down payment, but you may be able to cover your mortgage insurance.

9. Rent Out Part of Your Home
If you have the extra space, having a tenant can greatly reduce the cost of your monthly mortgage payment. If you have an extra bedroom, basement, or addition on your home, consider renting space out to a friend or trusted tenant who can pay you rent each month.

Even if it's just $300, that will help knock your mortgage payment down quite bit if you can't refinance or utilize some of the other options just yet.

10. Federal Loan Modification Programs
If you're undergoing a financial hardship and need to reduce your mortgage payment as a result, there area few federal loan modification programs to choose from. They can be available through your lender and you must meet certain eligibility requirements in order to reduce your mortgage payments short-term or long-term.

If you are having trouble paying your mortgage, talk to your lender and explore all of these options mentioned above to see which solution will help improve your situation.

7 Easy Ways to Trim Your Mortgage Costs

7 Easy Ways to Trim Your Mortgage Costs

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As with most homeowners, your mortgage payment is probably your largest monthly expense. Wouldn’t it be nice to trim this huge cost and perhaps shorten the life of your loan? We have listed seven tips below to help save you money on your mortgage.



[In Pictures: The Worst States for Millionaires.]

The tips below are based on this hypothetical mortgage example (savings will vary based on your actual loan facts and timing of the change):

$200,000 mortgage
30-year fixed rate mortgage
6 percent interest rate
$1,199 monthly principal and interest payment
1. Add One Extra Payment Each Year

Perhaps the easiest way to save money on your mortgage is to make an extra mortgage payment each year. These extra payments are automatically applied on your principal, not interest. Not only does your remaining balance drop, but you will not have to pay interest each month on that principal for the remainder of the loan term.

Savings: $47,000. By making one extra payment of $1,199 each year and applying it to your principal, you could save over $47,000 in interest and cut 5 years off the life of the loan.

2. Set up Bi-Weekly Payments

Another trick to pay off your loan early is by creating a bi-weekly payment plan. Put half of your monthly mortgage payment in a savings account every other Friday (or, on your pay day). Each month, pay your mortgage from the account. At the end of the year, you will have made 26 half payments, which is 13 full payments. This will leave with you an extra payment that you can put toward your principal. Most people manage the separate accounts themselves, but there are companies that you can hire to act as an escrow service and manage the payments for you. Beware that they could charge you for this service.

Savings: $47,000. Same as extra payment.

3. Get Rid of Your PMI

If your down payment was less than 20 percent, you were probably required to pay private mortgage insurance (PMI). However, you can petition your lender to cancel the insurance as soon as your mortgage balance falls below 80 percent of the home’s appraised value. This can happen if your home’s value has gone up or you have repaid some of the principal. This may require a new appraisal but could shave hundreds of dollars off your monthly payment.

Savings: $130 per month. If you only put down 5 percent and had a PMI rate of .78 percent, you could save $130 per month.

4. Reduce Your Assessment

Property taxes can cost thousands of dollars a year. If you think your home’s value has decreased in the last year and it was not properly accounted for in your tax assessment, you can petition your assessor and fight your assessment. Lowering your tax assessment will lower your yearly taxes.

Savings: Varies. Depends on your local tax rate and home adjustment, but could be hundreds of dollars a year.

5. Reset Your Mortgage

This is not commonly known, but some lenders will reset (recast) your monthly payment if you make a large payment towards the principal of your mortgage. Your monthly payment stays the same, but the term of your loan shortens. When the loan is recast, your monthly principal and interest is recalculated so you end up with a lower monthly payment over the existing term of the loan.

Savings: $120 per month. Putting $20,000 into the loan would reset the payment to $1,079, saving you $120 per month.

[See 10 Smart Ways to Improve Your Budget.]

6. Modify Your Loan

If you are late on your payments and are going through a financial hardship, you may be eligible to modify terms of your loan (such as rate, term, or principal balance) to make it more affordable. The goal of these programs is to allow borrowers to stay in their homes and continue making their monthly payments. Not everyone qualifies for these types of programs, but if you do, they can save you a lot of money. To find out if you qualify, contact the servicer of your mortgage or visit the Making Home Affordable eligibility site.

Savings: Varies. It can reduce your interest rate to as low as 2 percent, extend your term to 40 years, or reduce your principal.

7. Refinance

Lastly, the most common way to save money on your mortgage is by refinancing to a lower interest rate. Reducing your rate can lower your monthly payment and help you save on interest payments. However, there are costs associated with refinancing so you want to be sure you are going to save enough to cover the refinancing fees. With rates at historic lows, if you can refinance, and you haven’t already, you should consider it.

Savings: $126 per month. By lowering your interest rate to 5 percent, you would have a payment of $1,073 which would save you $126 per month. If the refinance costs $5,000, you would recoup the fees after 40 months.

Nate Moch is a mortgage correspondent for Zillow Blog, a resource for real estate and mortgage news.

The World's Top 10 Investment Banks

The World's Top 10 Investment Banks

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Investment banking is a stream of banking that primarily focuses on capital financing for global and local businesses, individuals and even governments. These diversified finance requirements can be in the form of equity/debt IPO, bonds offering, mergers and acquisitions, portfolio management, etc. (See Related: Information and Advice on Investment Banking)



How are investments banks ranked? While there can be several criteria, the easy ones to look at are the revenue numbers, global reach, employee headcount, income, etc.

This article lists the top 10 full service global investment banks, with a brief introductory description and recent income details of each, based on a combination of the above-mentioned parameters. Although investment banks have a lot more functions (like retail banking) which may not necessarily fall within investment banking space, the list below indicates the top rated banks and their numbers as a whole. Details specific to investment banking division are included, based on available data.

· Goldman Sachs (GS): One of the oldest banking firms founded in 1869 and headquartered in New York, GS offers a wide range of services spread across four divisions - investment banking, institutional client services, investing and lending and investment management. Goldman Sachs reported net revenues of $34.210 billion for 2013, of which investment banking division contributed $6 billion. Other divisions’ revenues were higher, but maximum percentage growth was in the investment banking space (around 20% - compared to 2012). Earnings per share (EPS) were $16.34.

· JP Morgan Chase (JPM): One of the largest investment banks, JPM Chase reported net revenues of $96,606 million, of which investment banking revenue contributed $1,700 million. EPS was $4.39. “The firm has $2.4 trillion in assets and $211.2 billion in stockholders’ equity” and operates in 60 countries with more than 260,000 employees with a diversified set of services. Apart from investment banking, it also operates in small business finance, international banking, transaction processing and private equity.

· Barclays (BCS): Founded in 1896, the London, UK based investment bank hit the recent headlines for allegations about rigging of London interbank rates and news about huge number of job cuts globally. Backed by a strong workforce of 139,600 employees globally, reports indicate total income of £28,444 million of which the investment banking segment contributed to £10,733 million – a segment decline of 9% compared to previous year. Overall, EPS was 3.8 pence. Along with investment banking, it has a strong presence in retail and commercial banking and card processing business.

· Bank of America Merrill Lynch (BofA-ML): The large entity formed by erstwhile Merrill Lynch being taken over by Bank of America following the 2008 financial crisis, offers a wide array of banking services including investment banking, mortgage, trading, brokerage and card services. Operating in 40 countries across the globe with total revenue of $89,801 million, the investment banking division contributed $6,126 million (up from $5,299 of 2012). The overall EPS was $0.94 for 2013. (Report)

· Morgan Stanley (MS): Founded in 1935 and headquartered in New York USA, the global firm employs 55,794 employees spread across multiple countries. It reported net revenue of $32,417 million, of which the investment banking segment contributed $5,246 million. EPS was $1.42. Apart from the usual capital raising, M&A, corporate restructuring services, the firm also offers diversified services like prime brokerage, custodian, settlement and clearing, etc.

· Deutsche Bank (DB): Based in Germany and listed on XETRA stock exchange, Deutsche Bank reported a net revenue of EUR 31,915 million. One of the largest financial services firms of Europe, DB specializes in the cross border payments, international trade financing, cash management, card services, mortgage, insurance and the usual investment banking stream. Deutsche has a global presence with operations in 71 countries.

· Citigroup: Tracing its roots back to the origin of Citibank in 1812, Citi today has 251,000 employees with business and operations in 160 countries. Of the total revenues of $76,366 million reported for 2013, contributions from investment banking rose 8% from the prior year to $4,000 million. EPS was $4.35. The bank has a strong presence in investment banking, investment management, private banking and card processing streams.

· Credit Suisse (DHY): With a net income of CHF 2,131 million and EPS of 1.22 in year 2013 (report), the Zurich Switzerland based Credit Suisse group founded in 1856 today employs 46,000 members across the globe in over 50 countries. Apart from the regular investment banking business, it also has presence in taxation and advisory, structural lending, real estate leasing and investment research services.

· UBS: Another Swiss investment firm founded in 1862 and headquartered in Zurich, UBS had a net income of CHF 27,732 million and EPS of 0.83 CHF in the year 2013 (report). The firm has a strong workforce of more than 60,000 employees across the globe with majority of them in US and Switzerland. The firm specializes in services to high net worth and ultra-high net worth individuals, in addition to the investment banking, private, retail and commercial banking streams.

· HSBC: Another London based financial powerhouse founded in 1865 with operation in 75 countries serving 54 million global customers through 254,000 employees, HSBC offers a wide variety of services ranging from forex, leasing, M&A, card processing, account services, investment banking and private banking. Revenue totaling $ 64,645 for year 2013, EPS was 0.84 USD (report).