Your home is typically the biggest and longest expense you incur. Once you purchase your home, the laundry list of projects and expenses never seem to end. It can be challenging to understand how you can afford your mortgage and all your additional home costs with the economy and unemployment still stunted by the coronavirus. Learn about three different options that can help you make your home more affordable.
1. Refinancing your mortgage payment
Interest rates are at an all-time low. Refinancing your mortgage can lower your monthly payment and help you save money in the long run. When you refinance your loan, you are taking out a new loan on your home to pay off the old one. You might also be able to change the terms of your loan. Keep in mind there are expenses to refinancing – like closing costs when you originally got your mortgage – but depending on your situation, you can potentially save money.
2. Using a home equity line of credit
Your laundry list of home projects can quickly turn in to thousands of dollars but renovating your home can easily add equity to it. A home equity line of credit (HELOC), a line of credit that borrows against your home, can be a useful vehicle to complete larger projects. A HELOC usually has a lower interest rate than a credit card and the interest might be tax-deductible. Consult a tax adviser for further information regarding the deductibility of interest and charges.
A home equity loan or a second mortgage might also be an option for you to manage expensive projects. A home equity loan provides you one lump sum and a fixed-rate on your payments. Your personal banker, tax, legal or financial advisor will be able to discuss the best options for you.
3. Mortgage forbearance
The Mortgage Bankers Association’s‡ (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance is around 8.39% as of June 28, 2020, which means nearly 4.2 million homeowners are in forbearance plans.
If you are struggling to make your mortgage payments, it is important to communicate with your lender. There are several programs and tools in place to help homeowners, but open communication is key, so your lender can support you. The good news is asking for mortgage forbearance won’t impact your credit score right now, but it will impact when you can refinance your mortgage.
Your mortgage payment and home expenses are some of the biggest expenses you have every month, but if you take advantage of the tools at your disposal, you may be able to make your home more affordable.
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