A mortgage is a double-edged sword!
It’s a great avenue to secure what could be your most valuable asset, but it can be expensive and might slow down your wealth creation. The current outstanding US mortgages stand at an eye-watering $11 trillion, which is not expected to slow down any time soon.
With the devastating impact of the Covid-19 virus, over 29 million homeowners are having a hard time keeping up, so it’s understandable if you’re looking for ways to save on a mortgage. We have some incredible mortgage tips that will help you save more money, and if you play your cards right, you can save up to hundreds each month.
Shop for the Best Mortgage Interest Rates
If you’re getting a mortgage loan, it’s advisable to shop around for the best rates before you settle. If you have a good credit rating, you can negotiate the rate and get a discount. You should start shopping for your mortgage well in advance of purchasing your home.
Beyond this, you look for special deals and discount plans because some lenders offer payments that escalate gradually.
Try to Make Bi-Weekly Payments
Making bi-weekly payments is one of the best mortgage tips you can come across for the simple reason that it could save you years of payments. What makes this a great way to pay down your mortgage faster is the fact that you’ll barely even notice any difference at all, and yet, you’ll make almost full payment by the end of the year.
You see, a year has 52 weeks, and when you opt to make bi-weekly payments, you make 26 payments in total annually. Twenty-six payments are equivalent to 13 full monthly payments instead of 12, meaning that you will have made an extra payment without feeling the effect by the years’ end.
The only problem with this is that some mortgage lenders don’t agree to it. You must check with your lender before you decide to do this because they could fine you for it, which will defeat the purpose of doing it in the first place. This is one of the best ways you can save money on mortgage.
Make an Extra Payment or Two Per Year
If making bi-weekly payments is not an option for you due to various reasons, you can opt to make an extra payment per year, which would essentially leave the same impact. If you get a holiday bonus or any other extra payments at any time of the year, you can always make one more payment towards your mortgage, which can make a whole lot of difference.
Most homeowners fail to understand how much of an impact one single payment can make on their mortgage. The thing is, it will add up over the years if you keep up with it, and you’ll knock off a huge interest sum and a few years off your loan. This is hand’s down one of the best things you can do to save on a mortgage and one of the best mortgage tips.
Consider Going for an Adjustable Rate Mortgage
If you took out a fixed-rate mortgage, it’s advisable to consider switching to a variable rate mortgage, but only if you plan on living in the house for the next five years or less.
Adjustable-rate mortgages offer low rates for the first five years, after which they become variable and could match the prime rates. This can potentially save you hundreds, if not thousands of dollars from your mortgage loan.
On the other hand, if you plan to live in the house longer, this could be a risky strategy because the housing market is bound to change over the years, and even the rates might be excellent at first, they may rise exponentially, leaving you with high-interest rates.
Beyond this, you can always split between an adjustable-rate and a fixed rate if you’re worried about fluctuating interest rates.
Use a Mortgage Offset Account
Mortgage offset accounts are bank accounts linked to home loans. Once you set up yours’ you can use it as a regular bank account, but the difference is that it offsets the amount of money you owe on your home loan. The interest of the loan is then calculated based on the reduced amount and the more you have in your account, the more you’re bound to save.
One of the most significant benefits of an offset account is that you can link as many as nine accounts, which will ultimately help you manage your funds easier. You also get a Debit Mastercard, which will help you access your money whenever you want. Before you open an account, though, check what fees apply because even though some may not charge anything, others do, and it may be a significant amount.
Buy a Less Expensive Home
If you are looking for a home right now and thinking of getting a mortgage loan, finding an inexpensive home may be more affordable. An inexpensive home will open up the possibility of paying a 20% downpayment, which will eliminate the costs associated with private mortgage insurance.
Of course, getting a cheaper home also translates to a smaller loan and lower interest rates, which makes this one of the best mortgage tips on saving money.
If you’re already living in a large house and the payments are taking a toll on you, consider downsizing and moving into a smaller house. This will reduce your monthly payments, your interest rates, and eliminate your mortgage insurance.
Selling your larger house for a small one will work quite well if you have a substantial equity amount because you can use that for your new house and keep your mortgage payments lower.
Refinance Your Mortgage
Unless you have done it already, refinancing your mortgage can significantly lower your costs and help you save money on mortgage.
You need to decide whether you only need to lower your payments, your long-term costs, or both. You also need to be wary of loan costs and ask in advance because most borrowers complain about surprise or hidden fees.
Mortgage Tips: How to Save Money on Mortgage
These are some of the best mortgage tips you need to know. As you can see, there is so much you can do to save money on a mortgage. Managing your mortgage payments right now may seem tricky, but you can choose the most ideal option for you and lower your costs.
If you’re currently looking for a mortgage, please get in touch with us for a quote and we’ll be more than glad to discuss your options!