How to save thousands on your house payment without refinancing

House payment is more than principal and interest

You can save on your house payment without refinancing your mortgage. And it can be cheaper and faster. That’s because your monthly housing expense is not just your mortgage principal and interest. It includes property taxes and homeowners insurance.

And homeowners insurance is where you can possibly cut a lot.

Mortgage refinance rates may not be low enough — yet

While interest rates have been falling lately, the recent extended run of rates below 4 percent put many, many people into good loans that they don’t need to touch.

However, rates have been declining lately. And not everyone has a 3.5 percent 30-year fixed mortgage.

While you are waiting for mortgage rates to drop into your strike zone, consider dropping your house payment by reworking your homeowner’s insurance.

Home insurance varies more than mortgage rates

Surprisingly, you could be leaving more savings on the table by ignoring your insurance policy than by refinancing. Consider that reducing your interest rate by .25 percent on a $200,000 mortgage would cut your house payment by less than $30 while shaving $500 off your insurance premium would net nearly $42 per month.

Grand Rapids, Michigan mortgage lender Bob Hein writes, “For the same coverage and same deductible, we have seen quotes for the same person looking to insure the same property ranging from under $600 for an annual premium, to over $1,800 for an annual premium. Surprisingly, these inconsistencies in the pricing of homeowners insurance policies are not extremely rare.”

How to shop for homeowners insurance

According to the Insurance Information Institute, you can reduce what you pay for homeowners insurance in 12 ways:

• Shop with multiple providers using online searches, word of mouth, and also check the companies’ rating with AM Best or Standard and Poor’s
• Raise your deductible. By increasing it from $500 to $1,000, you may be able to knock 25 percent off your premium
• Don’t insure the value of your land. It’s unlikely to burn down, blow away or be stolen
• Buy your home and auto policies from the same insurer. Bundling can save you up to 15 percent
• Make your home more disaster resistant. Ask your insurer for tips
• Improve your home security. You can usually get discounts of at least 5 percent for basic improvements. And more sophisticated systems can save you up to 20 percent
• Seek out other discounts. Insurers can offer discounts to a wide range of groups who may get better deals
• Maintain a good credit record
• Stay with the same insurer. Loyalty can get you a lower rate — 5 percent off if you stay with a company for three-to-five years, and 10 percent for six years or more
• Review the limits in your policy and the value of your possessions at least once a year. Cut coverage for depreciated items
• Look for private insurance if you are in a government plan. If you live in a high-risk area, you may be convinced that only the government will insure you, or provide affordable coverage. You might be wrong
• When you’re buying a home, consider the cost of homeowners insurance. Newer homes with better construction and security can be cheaper to insure. Check the CLUE (Comprehensive Loss Underwriting Exchange) report for the home you are thinking of buying. It shows the claims history of the property, and insurers use this when pricing your policy.

Use the savings to accelerate your mortgage payoff

You can increase the power of your insurance savings by using it to prepay your mortgage. If you have a $200,000 mortgage at 4.5 percent and pay $50 a month extra, you shave almost three years and nearly $18,000 off your mortgage costs. It’s like getting free money.

What about refinancing?

There is no reason that you can’t increase your savings by refinancing, also. But finding alternative ways to cut your housing costs can improve your finances even when interest rates are not low enough to support a refinance.

When are interest rates low enough? When the monthly savings of a refinance will more than cover the cost of refinancing in the time that you plan to keep your home.

The Mortgage Reports offers a refinance calculator that can tell you if a refinance would reduce your costs. Run the numbers and see.