The 2009 housing crash caused chaos. People were laid off and could no longer pay their mortgages, which were now underwater. Interest rates have fallen to help stabilize the market. They rose, then fell again in 2021, after the pandemic, to help boost borrowing.

It was the perfect time to buy a house. Let’s say you were able to purchase a $750,000 home with a 20% down payment of $150,000 and an interest rate of 3.885% for a 30-year loan. Your monthly payment would cost you $2,825 per month, not including taxes, insurance and other fees. That same loan with an interest rate of 6.885% would cost you $3,946.

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

But for those who currently have a mortgage payment, no matter when you purchased your home, here are some steps to consider to lower your monthly bill.

Drop Your Mortgage Insurance

I received a letter from my lender informing me that the house I purchased in 2018 had appreciated in value and that it was possible to drop my PMI (private mortgage insurance), which paid me $92 per month. month. After appraisal, the bank estimated that my house had actually appreciated at 80% or more of the loan value. That’s the magic number: If you put down less than 20% on a conventional 30-year loan, you’ll also be saddled with PMI. I asked Pratt if PMI was a scam. After all, won’t they have my house if I default?

Pratt explained: “What if you overpaid and went underwater? This happened a lot in 2009. PMI is a payment that helps the bank feel better about defaulting on an underwater mortgage. On the other hand, if you have a loan but not the 20% down payment, PMI can mean the difference between owning that home or not.

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

Refinance

Yes, refinancing can be expensive. If you’re planning to move in a year or two, it might not be worth it. But if you plan to own the property for a long time, it can be a wise decision. Look closely at the numbers to see when you will recoup these costs and start saving.

Pratt suggests discussing options with a mortgage broker: even a percentage point or a point and a half can be a significant drop. Your PMI is also reassessed because a refinance involves a new assessment.

Note that a refinance resets the clock. If you plan to repay your loan in 10 years, you will have to start your schedule again, depending on the terms of your new mortgage.

Reverse Mortgage

This is for older homeowners who want to leverage the value of their home without having to sell it: the mortgage company takes a lien and repays the borrower in regular payments. 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 getting the reverse mortgage, there will likely still be equity in the home. But, Pratt says, if the borrower gets the loan at age 70 and lives, say, to 120, collecting payments the whole time, the mortgage company takes the loss. This is also one of those transactions that you need to be absolutely clear about in case you are considering leaving your home to your heirs.

Redesign of the mortgage loan

Here’s an option for people who have a lot of money, whether from savings, a windfall, or cashing out from another investment. Pratt uses the example of someone taking out an $800,000 loan for a new home before selling their current home. When that first home sells a few weeks later and the borrower has $300,000 in cash, they can pay that amount off their existing mortgage, bringing the new loan to $500,000. At 6% for 30 years, the monthly payment would go from $4,796 to $2,998.

Evaluate insurance and taxes

Many borrowers choose to include property taxes and homeowner’s insurance in their monthly payment. Check with your insurance agent to make sure you’re getting the right coverage at the best price. If property values ​​have declined, it may be helpful to appeal to your tax commission to obtain a lower assessed value; many people did this successfully during the 2009 crash. But be aware that it can also backfire if the county reassesses your property for a higher value and you end up paying more taxes.

One last thought

Do today’s low interest rates mean we are at the start of a downward trend? You may want to take a wait-and-see approach, but never take anything for granted. “I wouldn’t tell anyone to play and wait because interest rates change every day. And you can always recharge again in 6 months to a year,” says Pratt.

Almost every purchase is a guess: will the price of eggs go down tomorrow? Will this automaker offer a huge discount next month? But the best way to move money is to learn as much as you can about how any changes will affect your situation before signing a series of documents. Math isn’t always fun, but it’s definitely your friend.