Consider Options to Lower Florida Home Loan Payments, Save Money, Avoid Default

Those seeking to buy property typically face one overwhelming obstacle: the amount of monthly payments due on their Florida home loan. Whether you’ve already taken out a mortgage or are merely contemplating such a decision, here are pros and cons - and other related details - of lowering the amount due on your bills.

Pros
You may have an adjustable rate Florida home loan that will “reset” in the next few months to a higher rate, and continue to adjust every year. Or perhaps today’s interest rates are lower than they were at the time when you took out your mortgage. If so, refinancing may enable you to lock in better rate.

Another possibility is that at the time you got your Florida home loan, you were more optimistic than you should have been about how quickly you could afford to pay it off. Extending the term of the loan and paying it off more slowly could also reduce the amount you have to pay each month.

Cons
While you can save in the short-term by reducing your monthly payments, you may face more in interest payments over the long-term if you extend your loan term and pay your mortgage off more slowly. There may also be financial penalties associated with a Florida home loan refinancing.

Extending the term
If you extend the term of a $100,000 mortgage at 6.25 percent interest from 15 years to 20 years, you could reduce your monthly payments by $126.49. However, you’ll also end up paying an extra $21,086 in interest charges. Only you can decide if that’s an appropriate trade-off.

Lowering the interest rate
In the case of a $100,000 mortgage amortized over 30 years, you could reduce your monthly payments by $47.91 by refinancing from a 6.25 percent interest rate to a 5.5 percent interest rate. More importantly, you’ll save $17,253 in interest charges over the life of the Florida mortgage loan.

Combining options
It may be possible to change both the term AND the interest rate of your mortgage in order to lower the payment. Start by finding or negotiating the lowest possible Florida home loan rate, then calculate the term that brings your payment to a level that’s acceptable.

Refinancing with an interest-only Florida home loan
You can reduce your monthly payments to the least possible amount by refinancing with an interest-only mortgage. The downside is that when the typical five- or 10-year interest-only period expires, your payments will increase considerably.

In fact, they will be higher than they would have been if you had stayed with a conventional mortgage. This option is therefore only worth considering if you are experiencing a temporary financial squeeze, but expect your financial situation to improve significantly in the future. The other drawback is that you aren’t building equity as you are not paying off any of the principal.

Downsizing your home
Did the thrill of the house hunt lead you to overextend yourself or be overly optimistic when it came to your finances? Realistically assess your finances and consider whether you can do with a smaller house. Think about a Florida home equity loan before moving, but don’t rule out the fact that you may need to downsize.

Follow one of these steps, save money and ensure the home buying process is a fruitful enjoyable one for yourself and your loved ones.