Buying real estate has always been one of the best ways to invest your money and build wealth and equity. However, along with home ownership frequently comes hefty mortgage payments that need to be made each and every month. A mortgage is often the biggest debt that a consumer will have in their lifetime. The good news is that there are ways to actually save money over the term of your mortgage. Here are five ways you can do just that:
1. Shop around for the lowest interest rate.
Even half a percent shaved off your interest rate on your mortgage can translate into thousands of dollars saved in interest over the mortgage’s term. Shopping around for the best quote and the lowest interest rate can be an effective way to save money on your mortgage, and even help you to pay this large debt off faster. You can enlist the help of an independent mortgage broker to shop around with different lenders for you. Interest rates are often negotiable, so don’t be afraid to negotiate with lenders to get them down to the lowest rate possible to help you save on interest.
2. Refinance your mortgage.
Mortgage refinancing is one of the most popular ways of saving money on a mortgage. Refinancing essentially involves paying off your existing mortgage with a completely new mortgage. Homeowners with a certain amount of equity in their home can qualify for refinancing, which can help save you thousands of dollars on mortgage payments by lowering mortgage interest rates. When the going interest rates in a given economic climate are at historic lows, it often makes sense to refinance your mortgage to score these rates.
3. Make extra mortgage payments.
It might sound easier said than done, but putting a little extra toward your principal and making extra payments toward your mortgage will help save you a lot of money in interest. Paying a little more here and there can make a significant difference in the amount of interest you pay in the long run and will allow you to pay off your mortgage faster. Consider making your mortgage payments biweekly instead of monthly, or change your amortization period from 30 to 25 years. Little changes like these can help you save a great deal of money on your mortgage.
4. Modify your loan.
Modifying an existing loan is particularly helpful for those who are finding it difficult to keep up with mortgage payments. Although it may sound like refinancing, it’s different — modifying a loan simply changes the terms of the current mortgage, whereas refinancing involves getting a completely new mortgage. Modifying a loan can help you save money on your mortgage by adjusting your loan terms, interest rate or principal balance to make your mortgage fit into your budget.
5. Get your home’s value reassessed.
The amount you pay in property taxes and private mortgage insurance is directly related to the assessed value of your home. Of course, in times of economic distress, the value of properties can decrease. and if your home has dropped in value recently due to the shaky economy, you can have it reassessed. If you do this, you can save money in both property taxes and private mortgage insurance.
Saving money on your mortgage is possible with some careful planning and a little tweaking here and there. Follow some of the aforementioned tips to save a few bucks on the length of your mortgage, and even pay off your mortgage debt faster.