Whether you’ve lost your job, welcomed a new baby, or are getting ready for your wedding, big life changes are a great opportunity to review your mortgage. Doing this can help you cut costs and boost your savings.
Job Loss or Major Illness
Losing your job or dealing with a serious illness that keeps you out of work can be stressful, especially when it comes to paying the bills. But there are ways to adjust your mortgage to make things easier.
First, consider refinancing your mortgage. Use a mortgage calculator to see how much you could save by switching to a loan with a lower interest rate. Mortgage rates are currently quite low, so now might be a good time to refinance. Depending on your existing rate, this could lead to significant savings on your monthly payments.
If refinancing doesn’t provide enough relief, you might look into forbearance. This option lets you temporarily pause your mortgage payments, usually for six to twelve months, until your financial situation improves. Keep in mind that forbearance is typically available to those who can prove their financial difficulties are temporary.
Wedding Ahead
If you’re planning a wedding, it’s a good time to reassess your mortgage using a home loan calculator. Marriage combines two incomes and credit histories, potentially qualifying you for a higher loan amount or a lower interest rate if your partner has good credit.
While it might be tempting to use your property to finance the wedding, it’s better not to. Your home is a long-term investment, and a wedding is just one day. Tapping into your home equity will increase your mortgage payments because of a higher principal on the loan.
New Addition to the Family
A new baby is a milestone that should prompt you to review all aspects of your life, including your mortgage. Although the U.S. Government doesn’t offer paid maternity leave, the Family Medical Leave Act (FMLA) provides up to 12 weeks of unpaid leave. During this time, refinancing your mortgage to a lower rate could help you manage expenses.
However, think carefully before making any big changes to your mortgage right after having a baby. For example, after our first child, we refinanced and soon realized that our once roomy house felt cramped with a growing family. The refinancing locked us into the home for the foreseeable future, which was something we didn’t anticipate.