Is Your Mortgage Payment Straining Your Finances? Here’s What You Should Do
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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What may have been manageable mortgage payments before inflation got the best of Americans as they are now starting to put a significant strain on many households, according to a TransUnion survey. In fact, four out of five recent homebuyers reported that their mortgage payment now feels like a burden.
If you’re in the same position and aren’t sure how you can sustain your mortgage, what options are available to you? Experts offered some recommendations.
Seek the Source of the Strain
You can start by getting clear on where the real pressure is coming from, said Joe Camberato, CEO of NationalBusinessCapital.com.
“Is it that your mortgage itself is too much for what you make now, or is it that day-to-day spending is making it hard to keep up?”
For some, the mortgage might be within reach financially, but overspending elsewhere leaves them scrambling when it’s time to pay, Camberato said.
“All you might need to do is adjust your habits to feel a lot less stressed each month. But if your situation has changed — let’s say you’re earning less than when you bought the home — then, yes, the mortgage itself could be too high for what you’re working with now,” he said.
Refinance Your Mortgage
If it really is too expensive, with interest rates dropping, a lot of people are looking to refinance. According to Ashley DeHart, a California realtor with Realty from DeHart, refinancing can lower your interest rate, reduce monthly payments or change the loan term.
“If you refinance to a lower interest rate, you might save hundreds of dollars per month,” she said.
For example, reducing your rate by 1% on a $300,000 mortgage could save you around $200 a month — $2,400 a year in savings is not bad.
Downsize
Another more dramatic option is downsizing, DeHart said.
“Moving to a smaller or less expensive home can significantly reduce your monthly mortgage payment and other related expenses [such as] utilities and taxes.”
Depending on your current home value and market conditions, you could potentially save thousands annually by downsizing, she explained.
Cut Other Expenses
If neither of those seems like a good option, then you might want to try reducing discretionary spending to free up cash to cover mortgage payments, DeHart said.
Camberato echoed this, “If your mortgage fits your income but things are still tight, tweak your budget to ease the monthly squeeze. Cut back on nonessentials if you can.”
“By cutting back on dining out, subscriptions or luxury items, you might save a few hundred dollars each month” DeHart added.
Change Your Saving/Investing Strategy
Yet another option, if you have savings or investments, would be redirecting those in such a way to prioritize mortgage payments and manage cash flow, DeHart suggested.
“This depends on your current strategy, but reallocating funds from less critical savings could provide immediate relief,” she said.
Rent Out Part of Your Home
If you’re open to sharing space with others, DeHart also recommended considering ways to generate rental income to supplement your mortgage payments.
“Renting a room or part of your home could bring in several hundred dollars per month, depending on your location,” she said.
Seek Loan Modification
On the other hand, if the mortgage is flat-out too high, call your lender, Camberato said.
“Lenders can sometimes work with you to refinance to a lower payment or set up a temporary repayment plan to give you some breathing room. You won’t know your options until you ask, so don’t wait to have that conversation.”
Loan modifications, DeHart said, can vary widely but may result in reduced interest rates or extended loan terms, lowering monthly payments.
You might even be able to combine several of these strategies to get relief from a mortgage that has become unwieldy.
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