A Simple Way to Lower Your Mortgage Payment

With home values across the nation slipping and mortgage payments adjusting higher, struggling borrowers are looking for relief.

Fortunately, mortgage rates are at or near record lows. However, banks and lenders have become much more hesitant to lend, making a refinance a lot trickier than it has been in the past.

Some borrowers have also taken advantage of loan modifications, though there are downsides to those, such as credit score dings and limited eligibility.

Regardless, both take time and may not be viable options for all homeowners.

So what other choices do you have?

Well, one of the four major components of your mortgage payment is insurance, commonly referred to as hazard insurance, which is required by your lender in order to protect their financial interest in your home.

The others are principal, interest, and taxes.

One of the most overlooked options to lowering the cost of your monthly housing payment is shopping your homeowner’s insurance with an independent agent to see if you can snag a lower premium.

Whether you pay your insurance premium direct to your carrier or through an escrow account, this option can save you big money.

Keep in mind that the longer you stay “loyal” to an insurance company, the higher the odds you’re paying too much.

If rates go up, you’re stuck with a higher premium when your policy renews. If rates go down, which has been the case for several years now, you probably won’t be notified and your premium will not decrease.

If you don’t ask any questions, they certainly won’t lower your rate.

Insurance agents have even noted that companies actually lower a home’s replacement cost (lowering the coverage) in order to keep premiums lower when they raise their rates! And you simply renew at the original, higher premium.

Shopping your insurance and switching to a different insurance company may save you as much as $1,000 per year (or $83 month) and you may even get your hands on higher liability limits and overall better coverage.

What if I escrow/impound my insurance payments?

Many insurance companies rely on your fear of the unknown to continue charging you too much for your homeowner’s insurance. They assume you’ll stay put because of the belief you can’t easily change insurer’s mid-term, or mid-mortgage. NOT TRUE!

The process of switching insurance companies is as simple as providing your loan servicing company’s name, address, and loan number to your new insurance company. Then they simply send a bill to the bank that has your loan, and the bank works out the details. It’s really that easy.

To sum it up, lowering the cost of your homeowner’s insurance is the easiest way to lower your housing costs without mucking everything up.

(photo: thetruthabout)