4 smart ways to reduce your mortgage payment

Even with the economy limping along, many homeowners are still in dire straits and in need of financial help. Some are even contemplating walking away from their homes to ease the financial burden. But what many often don't realize is that there are a few ways to reduce payments and still remain in the home.

Let's take a look at a few options:

1. Refinance into lower payments

This may be the most obvious option if you have equity in your home. The bank may be willing to take on a refinance of your property. However, if you don't have any equity and are severely underwater, then banks will shy away from refinancing you at this time. This option is for someone who may have been in their home for some time, and what they owe is less than the current appraised market value.

Talk to your bank about options as there are new programs emerging every day that reduce the strain and give homeowners a new path to complete a refinance on their homes.

2. Mortgage modification

This is sometimes similar to a refinance where you secure a new loan with a lower interest rate and new terms. However, some homeowners who are in very bad situations (loss of spouse, permanent disability, loss of income due to death of spouse, etc.) may be eligible for a principal reduction. This option effectively reduces the amount of the loan from, for example, $420k to $300k. The interest rate and term on the loan is also subject to change in this type of modification. This is, by far, the best kind of modification since it can result in a significant change in your monthly payment.

3. Challenge your property taxes

That's right, you can challenge your property taxes! Believe it or not your county can overlook critical details as it relates to your property assessment and assign a higher value resulting in higher property taxes. Sometimes they might have your home listed as having more rooms than in reality or a higher square footage resulting in a higher assessment. The resulting taxes are connected to the assessment, so you want to make sure that all the factors involved in the assessment are correct. Call your county tax office and ask about the forms needed to challenge your property taxes.

4. Shop around for new homeowner's insurance

Talk to your current homeowner's insurance company about any available discounts to reduce your rate. If they are unable to budget and cut you a break, then it's time to shop around. Get a few quotes that will help you determine the most cost-effective option based on your needs. Tip: Since most companies tend to give discounts for carrying multiple policies with them, you may want to bring, for example, your home and auto policies together with one company.

By reducing your mortgage payment you can free up funds for a variety of reasons: savings, reduction of cash outlay or home improvements. Whatever your reasons, make sure that you research your options carefully and understand everything prior to signing on the dotted line.