A mortgage payment is undoubtedly the costliest monthly expense in a budget, but these payments prepare you for your future because your home is an investment.
When buying a home, it’s essential to do your research on financing your home. One of the most important things to consider is the mortgage interest rate. There are also other essential things to consider that could essentially help you save money on your mortgage.
Let’s look at the different ways you can save money on your mortgage.
Ways to Save Money on Your Mortgage
1. Review Interest Rate Options
The two interest rates you can choose are a fixed rate and a variable rate (also called an adjustable rate mortgage/ARM), and these are based on your risk appetite.
A variable rate may be lower than a fixed rate, but your payments will increase when they do. If you’re on a budget, this can lead to financial stress when costs become unaffordable. If you’re not afraid of risk, then an adjustable-rate mortgage can be a way to potentially save money. The benefit is that if interest rates fall, you pay less for your mortgage. It’s a risk you’re going to take.
If you choose a fixed rate, you’ll have peace of mind knowing that your payments will stay the same for the life of your mortgage. When interest rates rise, you can be confident that your rates will remain unchanged.
2. Switch to bi-weekly payments
By changing your monthly payment frequency to biweekly, you can pay off an extra month of your mortgage in one year and potentially reduce your loan term by two years. In simpler terms, instead of making 12 payments per year, you will make 13 payments per year.
Switching to a biweekly payment will allow you to pay off your mortgage faster and pay less interest. You won’t even notice the difference by paying every two weeks, because you’re essentially paying the same rate every month.
Talk to your lender first to make sure there are no penalties, as this would defeat the purpose of the change. The benefits of switching providers must outweigh the costs for you to save money in the long run.
3. Make additional lump sum payments
If biweekly payments aren’t viable for you, consider making additional balloon payments toward your mortgage. Whether you use your holiday bonus or the money you were given on your birthday, these extra payments on your principal balance will reduce the length of your loan and the interest you’ll pay.
First, talk to your lender to make sure there are no penalties to pay, and if you get the green light, consider making additional balloon payments as often as possible. Even if it’s only $50 more, it adds up over time.
4. Negotiate rates with your bank
If you’re buying a house, don’t settle for the first offer you receive. Shop around and tell lenders you’re looking for the lowest interest rate, and your bank can negotiate a lower rate with you.
Your bank will consider lower rates if you have more than one product or service with them, an unsecured loan, multiple bank accounts, etc. The more products you have with them, the more you will be considered a valuable customer.
Your bank must think that it does not want to lose you as a customer.
Read also: How Much Will a $200000 Mortgage Cost You?
Conclusion
There are many other options you can consider to help you save money on your mortgage. This may include using a mortgage broker to negotiate lower rates with lenders, saving a larger deposit before getting a mortgage, and avoiding paying twice mortgage insurance.
Read also: What is a Mortgage Rate lock?
Do your research and find a solution, or even multiple solutions, to help you save. Don’t settle for the first low-interest rate, but instead continue to negotiate with your lender to review the terms of your mortgage and start saving today.
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