How to Lower Mortgage Payment Without Refinancing

Hello Readers and Bloggers,

I received the following e-mail from someone in the mid-west. Please see my comments, in yellow CAPS, throughout the letter.

"hi - a friend forwarded the link to your blog. PLEASE THANK YOUR FRIEND FOR ME. I HOPE THAT I CAN BE OF SERVICE. PLEASE CONTINUE TO PASS ALONG THE GOOD WORD ABOUT THE BLOG!. i am not facing foreclosure, so you may have more urgent questions to respond to - but i'm writing for some advice. THAT IS WHAT I AM HERE FOR! i live in an apartment in chicago. i recently purchased a "second home" in massachusetts, when i inherited enough money to make a good down payment on a small house. (i hope one day to retire there.) Due to a recent increase in my homeowners insurance -- Massachusetts FairPlan, my only option as a Mass. homeowner who is also an out-of-state resident -- my escrow requirements have increased, thus upping my entire monthly bundled mortgage payment. I AM NOT SO SURE THAT YOU ARE REQUIRED TO GO WITH THE MASS. FAIR PLAN. I HAVE OWNED SEVERAL PROPERTIES OUT OF MY STATE AND HAVE FOUND HOMEOWNER'S POLICIES, ALBEIT A BIT MORE EXPENSIVE. YOU MAY CONSIDER CALLING A PROPERTY AND CASUALTY BROKER AFTER CALLING THE NATIONAL COMPANIES (ALLSTATE, FARMERS, STATE FARM, ETC.). IF THE "BIG GUYS" CAN'T HELP, SURELY A GOOD BROKER CAN. YOU MAY FIND THAT YOU CAN GET A CHEAPER POLICY. ALSO, YOU DID NOT MENTION IF YOU ARE RENTING THE PROPERTY OR LEAVING IT EMPTY. IT CAN BE VERY DIFFICULT TO FIND A POLICY FOR AN EMPTY HOUSE...NOT TO MENTION, VERY EXPENSIVE PAYING A MORTGAGE WITHOUT RENTAL INCOME. IF IT IS EMPTY, PERHAPS A GOOD RENTER COULD OFFSET YOUR EXPENSES. A QUALITY PROPERTY MANAGER MAY BE OF ASSISTANCE. i talked with a Countrywide rep and loan officer about this, and after i explained that the new monthly requirement -- $86 more than what i pay currently -- constituted a hardship, they eliminated the$48/month federal "reserve requirement" fee (don't ask me what happened to all the other $48 payments that i've previously paid). IN 19 YEARS, I HAVE NEVER HEARD OF A "RESERVE REQUIREMENT FEE". OF COURSE, I PRACTICE IN CALIFORNIA. I DID, HOWEVER, DO A LITTLE RESEARCH AND AM UNABLE TO FIND ANYTHING ABOUT A RESERVE REQUIREMENT FEE. YOU MIGHT WANT TO CALL AND ASK EXACTLY WHAT THE FEE IS/WAS FOR. I KNOW IT WAS NOT PMI, GIVEN YOUR LARGE DOWN PAYMENT. I KNOW YOU WOULD KNOW IF YOUR PROPERTY TAXES WERE LOWERED. I KNOW THAT YOUR PROPERTY INSURANCE WOULD NOTIFY YOU IF THE PREMIUM WAS LOWERED. WHICH BEGS THE QUESTION, "WHAT DID YOU PAY $48.00/MO. FOR? THE ONLY GUESS I CAN MAKE IS THAT MASS. HAS SOME "SPECIAL' FEE OR THAT YOU DID NOT HAVE ENOUGH IN YOUR ESCROW ACCOUNT AND COUNTRYWIDE WAS PLAYING CATCH-UP UNTIL THE ACCOUNT WAS REPLENISHED. the loan officer then suggested an interest-only loan, but i told him no. when i asked about re-financing options, i was advised that i could theoretically re-negotiate/re-finance at as low as 5.5%, 30year fixed (stated income and assets, since they have all my records from taking over the mortgage), but the closing costs could be ashigh as $5800. he advised against this as not cost-effective, given how long it would take for me to re-coup savings. IT SOUNDS AS THOUGH YOU SPOKE TO A GOOD LOAN OFFICER. i have a "good mortgage" -- a good value-to-loan ratio (i was able tomake a down payment of a little more than 50% of the purchase price);an excellent credit score (no debt except for this mortgage, and ialways pay my bills on time); a job for life (tenured professor --although not a very good salary). i have very little savings, no cushion, except for a very modest retirement fund, which i add to each paycheck, but which i cannot touch for 10 years. i'm afraid that any future increases in homeowners' insurance and/or real estate taxes will make my mortgage unaffordable, since my salary is not keeping pace with the cost of living. should i explore other re-financing options with other banks, e.g.through lending tree? or my own bank, where i've been a customer forover 20 years? or do you think i will run into the same problems as outlined above? BASED ON THE LITTLE KNOWLEDGE I HAVE ABOUT YOUR EXISTING LOAN, I CANNOT DEFINITIVELY ANSWER WHETHER A REFI WOULD HELP. THE LOAN OFFICER THAT YOU SPOKE TO WAS PROBABLY RIGHT, HOWEVER. OTHERWISE, HE WOULD HAVE PUSHED YOU TO REFI. IT WAS AGAINST HIS INTEREST TO TELL YOU TO STAY PUT. TELLING YOU TO REFINANCE MAY HAVE BEEN TO EGREGIOUS TO JUSTIFY, GIVEN THE NUMBERS. AS FAR AS SHOPPING THE LOAN, IT IS ALWAYS GOOD TO SHOP, BUT YOU PROBABLY WILL NOT FIND ANY SUBSTANTIAL DIFFERENCE. should i just bite the bullet for now, and hope for a possible future cut in interest rates, and a better discount on closing costs? thanks *so much* in advance for any help or advice..."

DEPENDING ON HOW LONG YOU HAVE OWNED THE HOUSE, HERE ARE A FEW TIPS TO KEEP THIS HOUSE AFFORDABLE:

1) ASK FOR A TAX RE-ASSESSMENT (IF YOU THINK THE VALUE HAS DROPPED) AND GET YOUR PROPERTY TAXES LOWERED. THE COUNTY TAX ASSESSOR CAN SEND YOU THE FORMS TO HAVE A REASSESSMENT.

2) FIND A NEW, LESS EXPENSIVE, HOMEOWNER'S POLICY. I AM SURE IT CAN BE DONE.

3) IF YOU WANT TO REFI; RATES ARE GREAT RIGHT NOW. IF I KNEW THE FIGURES, I COULD BE OF MORE ASSISTANCE. PERHAPS BUYING THE RATE DOWN (AND THE PAYMENT) AND USING A FEW BUCKS OF THE EQUITY MAY HELP YOU SLEEP BETTER...EVEN IF IT TAKES TIME TO RECOUP THE COSTS. YOU ARE PLANNING ON RETIRING THERE, AFTER ALL. YOU MAY CONSIDER TAKING A LITTLE CASH OUT AND PUTTING IT INTO A "SPECIAL" ACCOUNT JUST FOR COVERING UNEXPECTED EXPENSES RELATED TO THE MASS. HOUSE. IT SOUNDS AS THOUGH YOU ARE ONE CRISIS AWAY FROM TROUBLE (IE-MAJOR LEAK).

4) FIND A RENTER TO OFFSET THE COSTS.

I HOPE THIS HELPS!

MortgageMaster