Here is a great guest post from Justin McHood of the Arizona Mortgage Team at 480-374-0303 or http://www.ArizonaMortgageTeam.com.
Many times, when I am talking with someone about refinancing their home they compare what their new mortgage payment will be with what their old one is.
Sometimes, in order to get the comparison right - I go into details about what their total monthly mortgage payment consists of: Principal, Interest, Taxes and Insurance - Also known as PITI.
The principal and interest are calculated simply by taking the loan amount and using the interest rate to get an exact number.
Your taxes are something that you cannot avoid paying… but as real estate values have went down here in Arizona, you can actually dispute your taxes if they are too high - and possibly get them lowered.
The hazard insurance (also known as homeowners insurance) is where people can often save significant amounts of money just by shopping around — one of the quickest, easiest ways to save money on your mortgage each month is to check the homeowners insurance rates that you are paying and make sure that they are “in the ballpark” of what other companies are charging.
Mortgage insurance is something that you are required to pay (or not) as a condition to getting a loan - based on the loan program (for example, FHA loans have different mortgage insurance calculations than conventional loans) and loan-to-value (having more equity in your home means you pay less in mortgage insurance).
When working with a loan officer, early in the process they will give you something called a Good Faith Estimate. At the bottom right of the Good Faith Estimate, you can clearly see the breakdown of all of the numbers that make up your monthly mortgage payment - the format will look something like this:
After seeing the breakdown of all of the different items that make up your monthly mortgage payment, you now have an idea of places that you can possibly save money - other than just getting the lowest interest rate and loan amount.
- You can save money by shopping for different homeowners insurance.
- You can appeal your tax assessment.
- You can increase the amount of the equity that you have in your property and pay less in mortgage insurance.
Because, in these hard economic times, saving money on your mortgage payment - whether saving it in PI or TI or MI — can make a big difference.
{ 6 comments… read them below or add one }
MPS 04.10.09 at 11:48 am
You can also just stop paying your mortgage and write them a letter explaining that it’s not worth half of what you owe them and they own it if they don’t reduce your interest rate and/or principle. And if they don’t renegotiate you’ll probably get to live in your house for free for another 6 months. That’s a good way to save money too.
John Wake 04.10.09 at 11:55 am
MPS, LOL! Well, that’s another approach.
I bet, since Justin is a mortgage broker, that he just assumed the bank had already foreclosed, took possession, hired a Realtor, priced it crazy low and one of Justin’s clients was chompin’ at the bit to buy the joint.
Kyle Pearson 04.10.09 at 12:18 pm
Yeah, its also a great way to never be able to get financing for another 5-7 years… Seriously, what has our country come to that its ok to default on our debt so easily? If i walked into best buy, picked up a 52-inch flat screen, and ran out the door with it (assuming i could lift it) i would be arrested for stealing right? but if i go in there with a plastic card, charge it, then never pay it off, i keep the tv and i just lose a little credit. Our system breeds poor ethics.
MPS 04.10.09 at 12:26 pm
Yeah Kyle, good point, that’s a good way to save money too. Charge up your credit cards and then file BK. What has our country come too? It’s called human nature. Our government fell asleep (or got paid off) and then greed ran wild. People are greedy by nature.
Russ 04.10.09 at 10:38 pm
“Yeah Kyle, good point, that’s a good way to save money too. Charge up your credit cards and then file BK.”
Yeah, but bankruptcy can be complicated. Federal court filings. New means testing. Walking away from your non-recourse Arizona house loan is the preferred approach. Easy peasy Japanesey.
randi 04.24.09 at 5:34 am
bankruptcy is complicated as you say, there are many reasons and ways to lead into