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Tips for Lowering Your Mortgage Payments

Many people are struggling to pay their home loan bills as a result of the bad economy. Don’t despair, however, if you are concerned about falling behind on payments, according to the California Society of CPAs (www.calcpa.org). There may be options available to you that can help make it easier to keep up with those monthly bills.

LOOK INTO REFINANCING…

With many interest rates at record lows in recent months, it may be possible to lower your monthly payments by refinancing your existing mortgage. For example, a $200,000 30-year loan with a 5.75% rate would cost you $1,167 a month, while the same loan with a 5% rate would be $1,074, a savings of nearly $100 per month. If you have held your current loan for several years, you may find that rates have dropped in the meantime, offering the chance to decrease your monthly expenses.

…BUT WATCH OUT FOR FEES

Be sure to check the fine print on any refinancing to see what kinds of closing costs the bank is charging. These might include not only points, but also administrative or underwriting fees and charges for the appraisal of the home. In some cases, you may not have to pay these fees up front because the lender will simply add them to the amount being refinanced. That sounds like a good deal, but when the total loan amount goes up your monthly payments do, too. Find out exactly how much these fees will cost you on a monthly basis, then decide if the refinancing is still worth it. You may also have to make monthly payments for private mortgage insurance if your equity in the home is less than 20% of its appraised value.

ASK THE LENDER FOR HELP

It’s always a good idea to call your creditors whenever you are having or expect to have problems keeping up with your payments. That’s true of mortgage lenders, too, and it’s especially true in a recession, when many borrowers are walking away from their debts and banks are anxious to help borrowers avoid foreclosures. Contact your mortgage lender, explain your situation and ask if they can offer you any accommodation to make it easier for you to continue making payments.
It’s a good idea to decide in advance what kind of modification you would like so that you’ll be prepared to make your case. You might, for example, ask for a temporary moratorium on payments, allowing you time to find a new job or catch up with debt. Extending the length of the loan, on the other hand, will require you to continue making your payments but they will be lower each month. You can find out more about both refinancing and mortgage modifications at the federal government Web site www.makinghomeaffordable.gov.

BE ALERT FOR SCAMS

Unfortunately, there are many con artists scheming to defraud people who are anxious to lower their mortgage payments and hold on to their homes. The federal government has made money available to lenders to help them provide mortgage modifications, but it is not necessary to pay a hefty fee to qualify for any of these programs, other than normal mortgage processing costs. Be suspicious, too, of any company that says it will “process” your monthly payments for you. You should send your mortgage payments straight to your lender and not to a third party.

ARM YOURSELF WITH INFORMATION

Instead of paying a fee for counseling or negotiating help, be aware that you can receive free government help from a HUD-certified counseling agency by calling 1-888-995-HOPE. More mortgage information is also available at www.hopenow.com.

CONSULT YOUR CPA

These are challenging financial times for many families, but remember that your local CPA can help. Turn to him or her for the answers to all your financial questions.
To listen to podcasts with more financial tips, go to http://www.calcpa.org/Content/community/financialempowerment.aspx.