Strategies to Save Money on Your Mortgage
There are Numerous Ways to Save Money on Your Mortgage Beyond Getting a Good Initial APR Mortgage Loans are a Huge Expense- This Knowledge can Save You Lots of Money When you begin shopping for a home, make the effort to be pre-approved for your mortgage, rather than just pre-qualified. This serves to give you a stronger negotiating position. Your offer will be taken more seriously and the sellers may accept a lower price. Remember, you make money in real estate when you buy- by buying for a low price. Avoid the temptation of getting the biggest and the best…Do not become “house poor”. It’s very wise to leave some margin your budget. Seriously consider a smaller mortgage that won't tie up too much money.It’s unwise to have your mortgage exceed 28 percent of your gross monthly income. Remember that you’ll have lower mortgage payments with a smaller home. If you made that mistake and bought too big of a house, sell it. If your house that you overspent on has more room than you are using and you are unwilling to sell it, consider this... You could rent out a room. College students, interns, and commuting airline crew members (those who live in a city other than where they are based) all make great candidates for renting a room. Ways to Save Money on Your Mortgage by Comparison Shopping...Check the Internet or your local newspaper for mortgage rate surveys. Check out the mortgage loans with several lenders. Be sure to get all the information about their rates (APRs), points, and fees.Spend the time shopping to find the lowest-rate mortgage with the fewest points. This will save you thousands of dollars in interest charges. For example, over the life of the loan, if you have a 15-year $100,000 fixed-rate mortgage, the difference between an APR of 7% and 6.5% will result in over $5,000 in interest charges. You would also save another $1000 if you have to pay only two points instead of three. You will be able to save thousands or more if you find the shortest-term mortgage you can afford. For example, at a 7% annual percentage rate (APR), for each $100,000 you borrow, you will pay over $75,000 more interest on a 30-year fixed rate mortgage than you would on a 15-year fixed rate mortgage. Here are two different loan calculators provided by other companies to help you compare:
See if there are any available builder incentives to reduce loan costs. It is important to realize that over the lifetime of mortgage loans that have an adjustable rate (ARMs), you can pay widely varying interest rates. Make sure you calculate what the highest possible monthly payment could be because there may be an increase of several percentage points. That increase can raise your mortgage payments by hundreds of dollars a month. Once you have your loan, this strategy can save money on your mortgage and get you out of debt sooner than you’d expect… Make biweekly mortgage payments. By paying every other week rather than each month, you will essentially make an additional monthly payment each year. This will save money on your mortgage by shaving off thousands of interest dollars. You will also shave years off a 30-year loan. Some companies charge a fee for doing this. As an additional way to save money on your mortgage, you can do this yourself. Another Great Way to Reduce Your Debt Burden and Save Money on your Mortgage…Cancel that burdensome private mortgage insurance (PMI) the moment your mortgage reaches an 80 percent loan-to-value.You mortgage lender won’t tell you this, but if your house has appreciated, you can do this much earlier than paying off 20% of the principle. You will have to pay for a new appraisal to demonstrate your home’s appreciation, but it is well worth it to get rid of PMI. Another way to accelerate the time to get to the 80% LTV (to cancel the PMI) is to make extra mortgage payments - monthly, once a year or on the bi-weekly schedule mentioned above.
If mortgage loans currently have high rates, look into buying down the rate to save money on your mortgage. This requires coming up with more money to finance the mortgage. If mortgage loans currently have lower rates than yours, look into refinancing your mortgage... Save Money on Your Mortgage RefinancingWhen the interest rates are lower than your mortgage, carefully consider refinancing your mortgage. Only do this if you plan to keep the new mortgage a few years.Do the math. To see if this will be a worthwhile way to save money on your mortgage, precisely calculate the fees, closing costs and points will be and then see when you will break even compared to the original mortgage that you have. If you live in an area with increasing home prices, buy a rental property. You can avoid capital gains taxes upon sale by living in it for two years. Using a “like kind exchange”, you can also avoid capital gains taxes from the sale of appreciated investment income. Consult a tax professional for the details of this great wealth building technique. We hope that this has been helpful information for you. At Financial Freedom Trail, we have many ways to help you with your personal finance.
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