Mortgage Payments Too High? How to Avoid Falling Behind
Congratulations! You’re a homeowner! Now it’s time to pay up. Purchasing a brand new home is exciting. However, falling behind on mortgage payments can turn your homeownership dream into a nightmare. Here are some things you can do to make sure you stay in charge of your payments.
Do you have an adjustable rate mortgage? You might want to think twice about keeping it. Bankrate’s Greg McBride says if you have an adjustable rate mortgage, your best bet is to refinance (since rates will go up) and switch over to a fixed-rate loan. An adjustable rate mortgage is usually not the best option since you’ll be hit with significant payment increases as the mortgage adjusts over time. Certified Financial Planner Don Taylor says a fixed-rate loan make sense if you plan to stay in your home for a while (roughly more than five years).
Shop for a new insurance policy
You can save some cash each month by looking for a less expensive homeowners insurance policy. “A lot of people have outdated policies and they could save some money by looking at a new one,” said McBride. But before you jump out there and choose the first insurance that seems cheap enough, do a bit of research. Financial education website NerdWallet suggests when shopping for a new policy that you take a look at not only the overall cost but also the claims processing and customer service. If you run into a snag, you want to make sure you’ll be able to get the help you need in a timely manner.
The Insurance Information Institute also recommends paying close attention to ratings. “Check the financial stability of the companies you are considering with rating companies such as A.M. Best and Standard & Poor’s and consult consumer magazines. When you’ve narrowed the field to three insurers, get price quotes,” the institute said.
Take a look at your budget
Take a hard look at your monthly budget to see if there are any ongoing expenses you could reduce or simply cut out entirely. Could you cut your own hair? Are there any steps you could be taking to slash your grocery bill? You may just find there’s an extra cash cushion you were never aware of. If budgeting is not fun for you, have your partner join in and go over the finances with you so that you can both see where you can locate some extra cash in your budget.
Ask for help
If you’re in need of a helping hand, don’t be afraid to ask. There are federal, state, and lender programs available that may be able to assist you if you’re experiencing difficulty with your mortgage payments. A housing counselor can help you decide how to navigate through the process of obtaining assistance and help you decide which options are best for your situation (such as a refinance, short sale, or forbearance for example). The Consumer Financial Protection Bureau recommends using their “Find a Housing Counselor” tool to find a list of counseling agencies that have been approved by the U.S. Department of Housing and Urban Development.