Why endure high mortgage payments when you can change the situation in your favor?
Paying off a Mortgage is a serious financial commitment that lasts for decades. Therefore, it is essential to make this process as comfortable as possible. The average monthly mortgage payment in Illinois in 2023 is $1,717. Although it is not the highest in the country, the average monthly payment in Illinois has been steadily increasing — for example, back in 2022, this parameter was $1,668.
The good news is that you can lower your monthly mortgage payments in Illinois — in this article, we’ll break down a few of the most popular options.
Refinance Your Loan With a Lower Rate
Refinancing is one of the most popular and reliable ways to get a low-interest rate. The process works according to the following formula — you replace your mortgage with a new loan with a lower interest rate. As a result, you pay off a completely different loan with greater comfort.
An example of how refinancing works
Let’s say you pay a 30-year fixed-rate mortgage. For 10 years, you paid a fixed rate of 8%. But then the rates fell, and you found yourself at a disadvantage.
By contacting your bank, you can try to refinance your mortgage with an interest rate of, for example, 4%. You’ll lower your monthly payments and make your loan more favorable. If rates drop again, you can refinance and lower your expenses even more.
Extend Your Loan Term
You might want to consider the second option if you compare a 15-year versus a 30-year mortgage. We know many people want to pay off their mortgage quickly and save on interest payments — but this is not always a universal solution. Refinancing your 30-year mortgage will allow you to lower your monthly payments.
Yes, on the one hand, you will increase the cost of the entire loan. But on the other hand, you will be able to save on monthly payments and use the freed-up money. You can also try to get a more attractive tariff.
Remove insurance payments
If you pay monthly mortgage insurance premiums, you can try to eliminate these costs or at least reduce them.
When it comes to insurance, you have several options:
- Refinancing to another type of loan that does not require insurance
- Accumulate about 20% equity in the property and then cancel the insurance
- Make a large down payment when applying for a loan and start paying off a mortgage with more capital
If you pay private mortgage insurance on an FHA loan, your insurance premiums work differently. The borrower includes an additional amount for insurance in each monthly payment. Once you have built up at least 22% equity in your home, you can ask the lender to cancel PMI.
Switch To A Fixed-Rate Loan
If you initially took out an adjustable-rate loan, your mortgage payments may increase or decrease occasionally, depending on how the market changes. Sometimes, this approach can cause a lot of trouble.
Initially, an adjustable rate loan offers lower rates, but that could change dramatically — for example, if rates suddenly rise. If you encounter this, consider refinancing your loan into a fixed-rate mortgage. This will ensure you have predictable monthly payments for the life of the loan.
Review Your Property Taxes
If your mortgage includes an escrow account, your monthly payment consists of the amount of these taxes. And believe us, sometimes this can be a very significant payment. Remember that you can appeal the tax assessment if you think it is too high.
For example, appealing a local property tax assessment would typically involve contacting your municipality, while appealing a county assessment would require going through the county Board of Taxation. In either case, you must provide supporting documentation to back up your claim.
Work with a reputable mortgage company
LBC Mortgage is a trusted and reputable mortgage broker in Illinois. For over 20 years, we’ve been helping home buyers obtain financing that perfectly fits their needs. We work with various lenders, allowing us to find different loan options and provide the most competitive interest rates and fees. Our clients include first-time home buyers, self-employed borrowers, and borrowers with imperfect credit histories. The main thing that unites them is the dream of buying houses. We are here to help you make that dream come true and guide you through every step of the mortgage process.