Your monthly mortgage payment is likely your biggest household expense in your budget. There are ways to reduce this fee without selling your home.
Make extra mortgage payments
Have you ever looked at your mortgage statement to see how much interest you pay? It’s sickening. That’s why you should always pay a little extra. You can do this monthly, quarterly, or yearly.
Bankrate offers a calculator to show you the value in making extra payments. For example, on a new $200,000 loan you save $17,000+ over the course of 30 years by making an extra $50 payment every month.
You set the terms and the amount.
Some mortgage companies offer a biweekly payment to knock off a significant amount of interest. However, this feature is usually not free. It often costs $2-400 to setup. I refuse to pay for something to save money, so I don’t use this option.
With online banking, you can set this type of bi-weekly mortgage payment up yourself. Spend five minutes with online banking, and you’ll save yourself money over the terms of your loan.
No matter how much extra you pay, it puts a huge dent in the interest you pay over 30 years.
Refinance your mortgage
When interest rates dip, mortgage refinancing increases. However, some people ignore the market dips and do nothing because they don’t want to invest the time or money in refinancing. After all, it costs a few thousand dollars and it takes time to gather up the documents you need for the bank.
However, don’t ignore the power of refinancing especially if you are in a higher interest loan.
Once you figure out your fees and interest rate, use a mortgage payment calculator to figure out your monthly payment with taxes and insurance.
This will give you a good idea of how much money you will save each month. You can figure out how long it will take to break even on refinancing once you know how much money you will save each year and the cost of refinancing.Once you know how much you will save each year, and the fees for refinancing you can figure out how many years it will take to break even.
Change the terms of your loan
You should look at refinancing more than just your current mortgage terms. Look at reducing your repayment to 15 years or even less if your loan is small. A smaller repayment period will save you big bucks.
There is no feeling like living debt free. Take control of your finances today, and start with your mortgage.