The real estate market crash of 2009 created chaos. People were laid off from their jobs and could no longer pay their underwater mortgages. Interest rates fell to stabilize the market. They rose in 2021 post-pandemic to help encourage borrowing, then fell again.

It was a great time to buy a house. Let’s say you can buy a $150,000 home with a 20% down payment for a 30-year loan and $750,000 with a 3.885% interest rate. Your monthly payment will run you $2,825 per month, before taxes, insurance, and other fees. The same loan with a 6.885% interest rate would cost you $3,946.

The good news for borrowers is that the Fed’s recent interest rate cut means it’s cheaper to borrow money. Staci Pratt He’s a California-based mortgage broker and real estate agent who says home prices have skyrocketed the last time money was cheap. “It was really hard for people to buy.” But he thinks the situation is different this time. “I predict there will be a gradual decrease, but there will be a decrease.”

But for those currently paying off their mortgage, here are some steps to consider to lower your monthly bill, no matter when you purchased your home.

Drop your mortgage insurance

I received a letter from my lender informing me that the home I purchased in 2018 had appreciated in value and that it was possible to lower my PMI (private mortgage insurance), which earned me $92 a month. After an evaluation, the bank determined that my home was actually worth 80% or more of its loan value. That’s the magic number: If you put less than 20% down on a conventional 30-year loan, you’ll also be charged PMI. I asked Pratt if PMI was a scam. After all, if I default, won’t they take my house?

Pratt explained: “What happens if you pay too much and go underwater?” This happened very often in 2009. PMI is a payment that helps the bank feel better if you default on an underwater mortgage. On the other hand, if you have credit but don’t have a 20% down payment, PMI could be the difference between owning that home and not owning it.

Credit Mix There’s a calculator to help you figure this out, and a better credit score means a lower PMI ratio. You may need to do some math to figure out whether you want to put that extra money in the bank for a down payment on a home later, or whether having a home that will likely appreciate is worth the extra money each month. This is a great conversation to have with your mortgage broker or financial professional.

refinancing

Yes, refinancing can be expensive. If you’re planning on moving in the next year or two, it may not be worth it. However, if you plan to own the property for a long time, this could be a smart move. Look at the numbers carefully to see at what point you’ll recoup those costs and start saving money.

Pratt suggests talking to a mortgage broker about options; Even a percentage point or a point and a half could be a significant drop. Your PMI is also re-evaluated because refinancing requires a new evaluation.

Remember that refinancing resets the clock. If you plan to pay off your loan within 10 years, you’ll need to restart your timeline depending on your new mortgage terms.

reverse mortgage

This is for older homeowners who want to capitalize on the value of their home without having to sell it; The mortgage company acquires the lien and pays the borrower in regular installments. Borrowers must be at least 62 years old and go through a screening process to make sure they understand how it works. If the borrower only lives a year or two after taking out the reverse mortgage, there will likely still be equity in the home. But if the borrower takes out the loan at age 70 and lives to, say, 120, collecting payments throughout the entire term, the mortgage company will take the loss, Pratt says. This is also one of those agreements that you should be absolutely clear on if you plan to leave your home to your heirs.

Mortgage reorganization

Here’s an option for people who have some money by cashing it in from savings, a windfall, or another investment. Pratt uses the example of someone who took out an $800,000 loan for a new home before selling her current home. When the first home sells a few weeks later and the borrower has $300,000 in cash, they can pay it off on the existing mortgage and the new loan amount is $500,000. Over 30 years, the 6% monthly payment will drop from $4,796 to $2,998.

Consider insurance and taxes

Many borrowers choose to include property taxes and home insurance in their monthly payments. Check with your insurance agent to make sure you get appropriate coverage at the best price. If property values ​​have dropped, it may be worth applying to the tax board for a lower assessment value; Many people did this successfully during the 2009 crash. But be aware that this could backfire if the county reassesses your property to a higher value and you end up paying more taxes.

One last thought

Do today’s low interest rates mean we are at the beginning of a downward trend? You may want to take a wait-and-see approach, but don’t take anything for granted. “I wouldn’t tell anyone to gamble and wait because interest rates change every day. “And you can always do re-feasibility in 6 months to a year,” Pratt says.

Almost every purchase is a guess; Will egg prices drop tomorrow? Will this car company offer a big discount next month? But the best way to move any money is to learn as much as you can about how any changes will affect your situation before signing a ream of papers. Math isn’t always fun, but it’s definitely your friend.