There is perhaps no word more dreaded and boring than “mortgage”. But - you might discover that the right mortgage can save you thousands of dollars a year if you know what to do and search for. There are a few different options to think about if you want to reduce your mortgage payment, such as increasing your down payment or simply rounding up your monthly payment. Each option has its benefits and drawbacks, but each option will make a difference and help you save thousands.
Since buying a house is probably the biggest single purchase you’ll ever make, it is easy to get overwhelmed by numbers - the sheer volume of paperwork and estimated costs might be daunting. However, if you still find yourself uncomfortable a few months or years later and would like to reduce the amount you still owe, there are several steps you may take. Here are six genius mortgage tips that will save you thousands.
Compare Different Options Online
The first step in lowering your monthly mortgage payment is securing a mortgage at a competitive rate. To do this, do some online surfing and find out what kind of rates are available right now. As mortgage brokers in Brisbane state, you could find that certain loan features and benefits are more relevant for you than others. The only way to know for sure is by comparing - determine which option seems good for you - read the differences between fixed and variable rates, as well as the pros and cons of both, choose one of these two, and then compare different offers from lenders. If you compare variable rates from one lender and fixed rates from another, it is not going to be so helpful to you. Using the services of an online mortgage broker may make the process even easier. They will lead you through the procedure, show you the best rates from the top lenders, and point out some perks you weren’t aware of.
Make a Lump Sum Payment
Paying off your loan early with a single, large payment may help you save thousands, assuming your mortgage’s terms and conditions let it. This is also called “lump sum payment” or “prepayment”. Whether it is a small or large prepayment, it makes a difference. Make sure there will be no penalties for paying in one large amount before you do it. A few lenders don’t let you prepay at all, while others let you prepay up to a certain amount each year, and still, others tell you what percentage of the remaining principal you may prepay each year without penalty.
Change Amortization Period
A shorter amortization period would allow you to pay off your mortgage sooner since it is the amount of time it takes to pay off the loan in its entirety. Your interest payments will be lower this way, but your monthly payments will be higher. On the other side, if you’re short on money right now and want to lower your monthly mortgage payment, extending the amortization period instead is a good option.
As mentioned, it should be noted that a shorter amortization period results in a much higher monthly payment, which may be unrealistic for many homeowners. This is why it is advisable to do thorough calculations to determine your actual monthly payment capacity before contacting your lender.
Change Payment Frequency
Increasing the frequency of your mortgage payments is another tip to save money. For example, if you make your payment every month now, you might consider paying it every two weeks instead. The amount of money you may save by doing this will surprise you, and it all ends with paying less interest in the long run. Switching to these “biweekly” payments instead of monthly ones results in 26 payments per year total. However, since some months are longer and others are shorter, you will end up paying for an additional month in one year.
Round Up Monthly Payment
Anyone can figure out that you can save money on your mortgage if you round up your payment a few dollars every month. You can save a lot of money over time, even if you add only $15 per month. Imagine you pay $982 per month toward a $400,000 mortgage. You figure out that a $18 increase won’t put too much pressure on your financial plan, so you choose to pay $1,000 monthly. This lets you save an additional $368 each year on your mortgage, for a total of $29,587 in principal paid off earlier than anticipated.
Watch for Hidden Fees
Mortgage lenders might charge different fees and interest rates. You should always make sure to read the small print while comparing offers so you know how much the loan will cost in total. In order to provide borrowers with low interest rates, some lenders impose upfront fees known as “discount points”. You should evaluate different offers by removing discount points. Think about how additional mortgage features, such as adjustable rates, balloon payments, settlement costs, and early payment penalties might affect your bottom line. We must note the annual percentage rate (APR) - it is a useful metric for comparing offers as it shows you the overall cost of the loan expressed as a percentage after fees are taken into account.
Both before you apply for a mortgage and while you’re paying it off, there are many ways to cut costs. When you take out a mortgage, it is in your best interest to pay it off quickly, especially if the interest rate is higher than your savings receive. You should constantly look for ways to save money, even if your mortgage is manageable and you’re paying it off faster than required. In most cases, the “how to save money” is where the difficulty lies. Numerous ways exist to cut costs and save money; nonetheless, the tips mentioned above are among the most effective. As you have already read, comparing different options, making a lump sum payment, changing the amortization period, changing payment frequency, rounding up monthly payments, and watching for hidden fees will help you save thousands in the long run.
