It is most likely that your mortgage payment is the biggest monthly expense that you have to bear. In fact, before taking out a home mortgage loan, it is not only vital to calculate your mortgage affordability but also to know the ways in which you can save money on your mortgage. There are ways in which you can repay your mortgage loan sooner than the tenure of the loan. This post will tell you about the tips that you should follow in order to save money on a home loan of $200,000 with 6% interest rate for 30 years. Read on.
#1: Make one extra payment every year
If you’re blessed with the financial means, the easiest method in which you can save your dollars on your home loan is by making one extra payment towards your mortgage every year. The surplus funds that you devote will be added to the principal amount of the loan and not towards the interest rate. This doesn’t only help you by dropping the remaining outstanding balance but you will also not require paying interest every month on that missed principal amount.
#2: Bi-weekly payments can also be allowed
Another option through which you can repay your mortgage loan early is by devising a bi-weekly payment. Calculate your monthly mortgage payment and keep aside half of it in your savings account every fixed day of a week. Then when it’s time to make your mortgage payment, pay it from that account. By the completion of the year, you’ll have made 26 half payments which is equal to 13 full installments. So, as you see, this too will leave you with an extra payment towards the loan’s principal amount.
#3: Pay down more to eliminate PMIs
Homebuyers who are not able to pay down 20% of the loan balance are forced to pay PMI or Private Mortgage Insurance. If you too are sailing in the same boat, you can negotiate with the lender to cancel the insurance as soon as the balance of your mortgage falls under 80% of the appraised value of the home. However, make sure that this can only occur when your home’s value appraises and the principal is repaid partially.
#4: Opt for a loan modification
In case you’re falling behind on your payments and you’re facing a financial hardship, you are allowed to opt for a loan modification where you can alter the terms and conditions of the loan to make it reasonable. The ultimate goal of the program is to let borrowers stay in their own homes and keep making their payments. Initially, you need to contact the servicer to check if you qualify.
Even when you wish to sell off your current home and get a new one, you have to consider whether or not your mortgage loan lender allows you to prepay the loan without any penalties. Consider the above mentioned points if you want to save money on your mortgage.