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3rd Quarter 2017

4 Ways to Save Money on Your Mortgage

Your mortgage is probably one of your largest monthly expenses. That makes it a juicy target when you're searching for savings to free up extra money for your other goals.

1. Reduce your interest rate.

If interest rates have dropped since you took out the mortgage, you could lock in a lower rate and reduce your monthly payments by refinancing. But first make sure you've saved enough to make the cost of refinancing worthwhile. Calculate how many months it will take for the savings from lower payments to exceed the cost of refinancing. For more information, see the Federal Reserve Board's Consumer Guide to Mortgage Refinancing.

2. Drop Private Mortgage Insurance (PMI) as soon as you can.

If you made a down payment of less than 20 percent when you bought your home, your lender may be charging you for PMI, which can cost hundreds or thousands of dollars every year. But as you make payments, you gradually build up more equity in the home and your loan balance shrinks. If you took out your loan after July 29, 1999, your lender must cancel PMI automatically when the loan's balance reaches 78 percent of the home's original value, based on your original payment schedule. But ask your lender if you can qualify to get the PMI canceled before then. You may be able to have PMI canceled when the balance drops to 80 percent of the original value if you have a good payment history and an appraisal verifies that the property has not declined in value. And if the value of the property has increased since you bought it, some lenders let you cancel PMI based on the property's current value if you've had the loan for at least two years. If you closed on the mortgage less than five years ago, you may be stuck with PMI until the loan balance drops to 75 percent of the current appraised value. The rules for loans made before 1999 vary by lender and state.

3. Make extra payments toward the principal.

Paying extra when you have extra cash will help you pay off the mortgage earlier and pay less interest over the life of the loan. But you'll still have the flexibility just to make your regular payments in months when you don't have the extra cash or if you have more pressing needs for the money.

4. Appeal your property tax bill.

If housing values in your neighborhood have been going up, then your property tax bill may have risen, too. But if your house isn't as valuable as others in the neighborhood, you can gather information and contest your municipality's assessed value of your home. Your assessment notice should outline the steps to take to contest the value. A successful appeal can pay off year after year in the future.

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