Saving in the City: Ways to Lower Mortgage Costs in an Urban Area

When the economy takes a nosedive and the unemployment rate remains at all-time highs, homeowners begin to scramble to look for real ways to lower their mortgage costs. Before refinancing a home, homeowners often search for other avenues of cash to help with mortgage cost such as increasing savings, applying for loans, or pursuing a second job. These can be especially difficult for home owners who reside in large cities and other urban environments as demand for low interest loans and competition for available job vacancies are high. Mortgage holders in a city or section of a city are often in the same boat—looking for ways to pay off their home loans by finding more work or securing a loan. In a down economy with a high unemployment rate, acquiring these can often feel like an exercise in futility. Nevertheless, there are things that homeowners can do to lower the cost of their mortgage.

Know Your Situation

Before you make any drastic moves, know what you can and can’t do when it comes to your mortgage. If you have little to no experience with this sort of thing, your best avenue would be to contact an approved housing counselor that is accredited with the Department of Housing and Urban Development. This government agency provides homeowners and mortgage holders with free advice on what you can do to lower your mortgage without having to refinance. Once you receive some guidance from a counselor, you will probably be instructed to contact your lender’s loss and mitigation department. In many cases in which you can prove you are suffering some form of financial hardship, mitigation offices can help restructure your mortgage that will benefit both parties. Mortgage holders who have consistently paid on time will have an easier time doing this than those who are often delinquent and waited to contact a public counselor. If you are able to get your loan restructured, this could have negative consequences for your credit score, but it is better to be able to pay off the loan comfortably than to default and damage your credit score to an even worse degree. Mortgage holders should check out the FDIC’s Loan Modification Program Guide for more information about restructuring.

Turn the Tables

Mortgage holders who are seniors can consider a reverse mortgage which allows homeowners over 62 to convert their home as an asset directly into cash before any loan is repaid. This allows seniors—who generally are not working—to remain in their homes and still be able to afford it. But be careful. There are costs associated with reverse mortgages that may not be in your best interest if you are a senior. Many of the costs can outweigh the benefits in this regard, so it is important you do as much research as possible before you sign up for a reverse mortgage.

Obama-ize Your Mortgage

If your mortgage dates back to before January 1, 2009, you may be eligible to take advantage of the federal government’s Making Home Affordable Plan to reduce your monthly payments. Total housing costs (including taxation, insurance, and any other costs associated with your home) must sum over 31 percent of a mortgage holder’s total monthly income. The home in question must be owner-occupied, is plan can help American families reduce the amount of money they pay each month on their homes. The was the plan is structured also benefits your lender in some ways, so it would be wise to contact them to see if and how you qualify for specific federal programs that were put into place to help people with their mortgage costs.

Enhance Your Credit

Doing whatever it takes to beef up your credit score can help you secure a loan with a low interest rate that you can use to pay off some, or all, of your mortgage. While these may be difficult to find (in terms of reasonable interest rates), it never hurts to shop around and seek out loans that can possibly help cut the costs of your mortgage. As the economy rebounds, more lines of credit will begin to open up with lower interest rates. When this time arrives, you will want to be at the front of the line with an attractive credit score in order to secure a line of credit that is attractive and efficient in decreasing your mortgage cost.

Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy and save money withNerdWallet’s best credit cards for bad credit.