6 Ways to Save on Your Mortgage Despite Rising Rates
What is the biggest expense on your budget? Most of you will answer this question as a housing expense. Many people borrow money to fulfill their need to buy a home. And they have to pay interest on borrowed money. Sometimes they actually have no idea about how much interest they are paying or what they will pay in the future. Sometimes the interest amount becomes almost equal to the principal over the period of time. Isn’t that scary? Obviously, it is.
Are there any ways to save on the mortgage for first time buyers and contribute to overall savings? Yes, there are. Here we have come up with six tried and tested strategies to reduce the total cost and save on the mortgage despite rising rates. Keep reading to fetch yourself all the answers.
Save with your better rate – The best way to save loads of money is to get the lowest rate for which you qualify. If you have decided buying a home, you might have been considering going to a bank. But do you know that you are likely to pay a higher rate if you go to a bank as they “bank” on your loyalty instead of competing strongly on rates?
Realtors and real agents can give you the best advice in this regard to qualifying for the best rate as per your application details.
Bi-week mortgage payments – Make it a principle to pay mortgage payments every two weeks. If you are of the notion of making monthly payments, switch it to bi-week mortgage payments. You would be surprised to know that the bi-week payment plan gives you the option of 13 payments per year. The extra payment you make will be applied to your principal every year. Consequently, your interest amount will decrease with the reduction in principal. Additionally, the more amount you pay as interest, the faster you will be able to build equity in your house.
Before switching to bi-week mortgage payments, ensure that your mortgage servicer has the option for such kinds of payments. It shouldn’t add fees to your statement if you opt for this method. Don’t forget to ask if these payments will be applied to the receipt or held till the month-end. You will get the benefit of these payments only when the payment you make is applied to the receipt.
Recast your mortgage – Recasting, also called re-amortization, is the process that requires the borrower to pay a significant amount toward the owed balance (principal) on the mortgage. The payments which remain are recalculated on the basis of a new, lower principal balance. Then, a new loan payment schedule is created, which is termed the amortization schedule. It helps alter the process of mortgage payoff, and you end up paying a lower monthly payment on the existing term of the loan.
Extra mortgage payments – If you don’t find any bi-weekly mortgage payment plan with your servicer, you need not worry. An alternative solution is to make one extra mortgage payment every year. Or you can divide the monthly payment by 12 and add the amount to the monthly payment. You can take the help of either of these options to pay the loan quickly and thus save a huge amount on interest.
Co-live to co-mortgage – Everyone wants an affordable home. You can think of co-ownership or multigenerational living if it’s a larger home so that you can easily share that with your family or friends. You will have the needed resources and can split the larger payments when it comes to monthly mortgage payments to reduce the burden on yourself. If you live in a higher-priced region, this method will rightly save you loads of money. Thus, with the right planning of co-living and co-mortgage, you can get home ownership soon.
Streamline refinance – The option of the streamline refinance gives you the ease to make the most out of a lower interest rate and lower monthly payment. Plus, contacting lenders who are ready to work with you at a lower rate without resetting the term makes the task easy for you. If you have taken a conventional loan, you might get the option of a rate-and-term mortgage to refinance. So, streamline refinance to save on your mortgage.
To make a long story short.
It is not only important to have the best rate but also to get the ease of flexible mortgage products. Your mortgage should work in accordance with your financial goals. So, ensure that your mortgage payments are not working against you. Follow the above-mentioned methods to save money on mortgage payments, achieve your financial dreams and buy the home of your dreams.