Wednesday, January 20, 2010

Cut your mortgage payment down, without refinancing or modifying you loan

Pay attention to your Homeowners insurance, and Flood insurance (if it's required). Then be aware of when your mortgage company sends you your yearly "Escrow Analysis".

Here's what happens:

Your homeowners insurance (and Flood) can be lowered simply by knowing the rules and reading the fine print on your policies. Once you fix it and get it lowered you can then call your mortgage company and ask them to re-evaluate your escrow. This, in turn, will lower your monthly mortgage payments (if your insurance and taxes are included in your payments).

First of all, don't let an insurance company TELL YOU how much coverage you MUST have. Alot of companies use "information" systems that tell them how much sq. footage you have, in turn telling them how much it would cost to replace your home if it were destroyed. Also, some of them will tell you that you MUST get the amount of your mortgage or the amount you paid for the house... Not true. If your house is destroyed, your land is STILL you only need the amount that the HOUSE is valued at without the land. You can actually look on your tax bill and see the values of the house and land separated. Example: Mr. Smith pays $400,000. for his home. His mortgage is $350,000. The town says that his home is worth $250,000. and the land is $150,000. He can cover his home for $250,000. Alot of people don't know the rules and just get coverage based on the sales price and/or mortgage amount.

NOW, the second thing to do, is READ THE FINE PRINT! Every year my mortgage company would send me a letter saying "you do not have enough Flood insurance and if you don't increase it we will force you to by assigning you the difference". In turn, my monthly payments would go up.


Well, I finally inquired as to why this is happening. WELL, guess what..........almost every insurance policy has "in fine print" that your policy will increase every year because they feel that the cost to replace your home increases, as well as the value of your property. So every year my homeowners policy was going up and I didn't know it. When your homeowners policy goes up, the bank insists that your FLOOD insurance also has to "match it" leaving you with a DOUBLE WHAMMY! This is crazy. Especially since we all know that home values have dropped dramatically.

This is ridiculous!!! So here is something you can do...........switch insurance companies every year. If I keep the same one, the contract will allow them to increase the value amount that is covered. BUT, if you sign up with a new company, it's like starting all over again at the value you want covered. Example: Mr. Smith (above) can get $250,000 in coverage with a new company, but will have to be covered for $275,000 now if he stays with the same one (which would increase his mortgage payments).

So people, this may be confusing to you, but if you have any questions, feel free to ask.
I just switched insurance companies AGAIN..........and insisted on having my home covered for ONLY the value of the HOME (not the land or the mortgage amount).

I just decreased my mortgage payment this year by $100/month.

This is not legal or professional advice, this is my "opinion" on how to handle reducing your mortgage payments