Mortgage interest rates have been stubbornly high for several years, with the uptick rising since 2022, according to the Federal Reserve Bank of St. Louis. High rates make it difficult for prospective buyers to afford to purchase a new house, but that’s only half of the equation. For homeowners currently in a mortgage with high interest rates, it can easily add hundreds of dollars to a monthly payment, further stressing a budget.
Here are top possible ways to claw back some savings for Americans stuck with a high interest rate.
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Recast Your Mortgage
Refinancing a mortgage is a common solution given to people wanting to lower their interest rates. Unfortunately, that wisdom is short-sighted in a difficult climate. Recasting a mortgage can be a suitable alternative, particularly if you’ve recently made a lump-sum payment towards the loan.
Mortgage recasting allows the lender to re-amortize your loan, based on the new, lower balance. Nothing changes about the loan and there’s no credit check. The result is a reduced monthly payment. You may pay a small fee to process the recast, but you incur other costs. Not all banks offer recasting, so it’s best to inquire with the lender if this is an option.
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Eliminate Unnecessary Subscriptions
Subscriptions are seemingly everywhere in our culture. Marketed as convenience, they come at a cost, especially if you don’t regularly use the service.
The subscription industry is a big business, with a recent CNET survey revealing Americans are spending nearly $1,100 annually on subscriptions. Americans with high mortgage interest rates should diligently examine their subscription spending. Cancel anything you’re not using or receive little value from to free up savings.
Ask To Remove Your Private Mortgage Insurance
Conventional wisdom is to put down 20% when purchasing a home. Not all home buyers can do that and many get private mortgage insurance (PMI) added to the cost of their mortgage.
Intended as a protection for the lender, this can add hundreds of dollars to a monthly mortgage payment. The amount you pay depends on your mortgage loan amount and was as much as 1.86% of your loan, as of 2022, according to Fannie Mae. For a $200,000 mortgage, that could add up to $3,720 annually, or $310 monthly.
You can request the service to cancel PMI when your principal balance hits 80% of the original value of the home, according to the Consumer Finance Protection Bureau (CFPB). Once your balance hits that level, contact the servicer and ask what’s needed to remove PMI.
Shop Around for Cheaper Home Insurance
Homeowners insurance has steadily increased in recent years. Rates increased by 20% in 2024 alone, according to Consumer Reports, but there are still opportunities for savings.
It’s best to review policies annually. If your policy has steadily increased, comparison shop to identify money-saving opportunities. Don’t overlook bundling opportunities with your auto insurance to drive more savings.
Appeal Your Property Tax Assessment
It’s often said that two things are certain in life: death and taxes. Property tax assessments can be a bane to many homeowners. Assessments continue to increase, with the average hitting $3,500 in 2024, up 2.8% from 2023, according to Realtor.com.
Analyze your assessment and compare it to similar homes in your area. If you believe it’s off, you can file an appeal with the local assessor’s office. Realtor.com believes almost half of Americans could save through such actions.
High interest rates make homeownership more challenging. With purposeful action, it’s possible to soften the blow and free up more money in your budget.
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This article originally appeared on GOBankingRates.com: 5 Ways To Reduce Home Costs If You’re Stuck With a High Mortgage Interest Rate
