5 Ways to Save Money on Your Mortgage
Friday, March 21, 2014, 1:00 AM | Leave Comment
With the housing market the way it is, more and more home owners are looking for ways they can save money on their mortgages. Although home ownership is costly, being able to save money is rather easy if done right. Many home owners want to save money on their mortgages, and are unsure about how to go about doing so.
Here are a few simple ways to help save money on your home loan.
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Make More than the Minimum Payment
Although this seems like an obvious idea, many home owners in fact do not make more than the minimum monthly payment.
If you are able to afford more every month, then it would be wise to put it towards the loan.
By making more than the minimum every month, you are putting more towards the principal which will save you money over the course of the loan and allows you pay off your home quicker.
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Switch to Bi-Weekly Payments
By switching to bi-weekly payments, this allows home owners to make a full extra payment every year.
Most home owners make 12 full payments, but going to a bi-weekly system allows for 13 full payments.
By doing this, homeowners will be able to pay off their loan much sooner due to the fact that more is being paid to the principal each year.
If your mortgage lender allows you to do a bi-weekly payment plan, then that may be something worth looking into.
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Reducing PMI
If you are home owner who did not put down at least 20% as your down payment, you will have to pay what is called private mortgage insurance, or what is commonly referred to as PMI.
PMI is added to your monthly mortgage payment until you get to 20% equity. If you have to pay PMI, considering to make more than the monthly payment would be a good idea, as the extra amount would go towards the principal, thus bringing the loan amount down and equity up quicker.
By doing this, you will pay off the PMI much faster than if you just made the minimum payment, which will save you money in the long run.
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Refinance
One great way to save money is to refinance. By refinancing your loan, you can save a great deal of money in the long run.
Although the savings are substantial, you will not notice much until after you recoup the costs, which can be a few thousand dollars.
Refinancing is a great idea for those who had a high rate when they originally purchased their home, as they can get a lower rate depending on the market.
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Watch Your Credit
If you are looking to refinance, most lenders want to see that you do not have many other debts. On average, a 30% debt to income ratio is considered very well when looking to refinance.
Another thing to watch for is your credit score. By maintaining a solid credit score, you are eligible for a lower rate, which is where the savings will come from.
Credit is one of the most important aspects of home ownership, and without it in good standing, you may be paying too much than you should.
These simple tips will allow most home owners to save quite a bit of money on their mortgage in the long run, as well as help reduce the life of their loan.
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Mark Scheets is a writer for Total Mortgage Services. Total Mortgage has experienced loan officers licensed in over 30 states as well as Washington D.C. to with your home buying and refinance needs.
