As a homeowner or prospective homebuyer, your mortgage is likely one of the largest financial commitments you’ll ever make. That’s why it’s important to work with a mortgage agent who can offer strategies for you to save money throughout the life of your mortgage.
Here are some expert tips to help you save on your mortgage:
1. Increase your down payment. Saving for a down payment is no easy feat but, the more you put towards the cost of the home, the less you need to borrow. And with a smaller balance, you’ll reduce the amount of interest you’ll pay over the life of the mortgage. If you’re able to put down more than 20% of the value of the home, you’ll avoid paying mortgage default insurance, which is a mandatory requirement for those having to borrow 80% or more in order to buy their home. These premiums protect your lender in case of payment default and, over time, they can add up.
2. Make extra payments. One of the easiest ways to save on interest is by making extra payments. Even small amounts, like rounding up your monthly payment or making a lump-sum payment during the year, can significantly reduce your principal balance. The less you owe, the less interest you pay over time. It’s important to know how much your lender allows in extra payments per year so you’re not charged a fee for overpayment.
3. Make more frequent payments. By switching from monthly to bi-weekly payments, you’ll make 26 payments annually instead of 24. This extra payment each year can help reduce your principal faster and save you thousands in interest.
4. Choose a lower mortgage amortization. Longer-term mortgages (eg, 25 years) may have lower monthly payments, but they cost more in interest. If you can afford it, consider a shorter mortgage amortization (eg 15 or 20 years). You’ll pay higher monthly payments, but you’ll save significantly on interest and own your home sooner.
5. Refinance when rates drop. Interest rates fluctuate over time and, if they drop significantly, refinancing could be a smart move. Lower rates mean you could reduce your monthly payments or shorten your mortgage term, ultimately saving on interest costs. Your mortgage agent will be able to crunch the numbers and determine if refinancing makes sense for your unique situation.
By implementing these strategies, you can reduce your mortgage costs and achieve financial freedom sooner. Always consult your mortgage agent to determine the best approach to meet your specific needs.
Have questions about how to save money on your mortgage? Answers are a call or email away
