How You Can Save Money On Your Mortgage
How Can You Save Money on your Mortgage?
Without getting into different loan rates in this article, there are many ways that you can save on a "traditional" mortgage and not feel the bite quite so hard.
It's all about mortgage savvy and knowing what's available....then knowing which scenario will be best for you.
Let's look at a couple of ways to handle your financial planning when it
comes to getting the most comfortable feeling mortgage you can get and becoming more mortgage savvy!
Tips on How to Save Money on your Mortgage
Here are some great ways to use your mortgage savvy and save money on your mortgage!
- Years or points. Think in terms of 15 years or points. If you have a great credit history and your debt is completely manageable, think about getting a 15-year mortgage rather than a 30-year mortgage. You can go on line and check out mortgage calculators. Or you can play with the points and see if going that route will save you more in the long run. Either way, these are 2 great ways for folks with excellent credit to save on their house.
- Add in the closing costs. This has become a commonplace occurrence these days. Instead of paying the asking price for the house you're interested in buying, you and the seller decide that you'll ask him to charge more for the house....the "more" being what your closing costs will be. You add in the closing costs (roughly 6%) to the mortgage sum and that is what you finance the house for. The seller then returns the extra money to you upon completion of the paper signing and you pay the closing costs. Why do this? Well, because you end up not having to pay out of pocket for the closing costs, and yes, you increase what you have to borrow, but your mortgage interest is tax-deductible. The house does have to appraise for the slightly increased agreed upon price, however, but if it does, this is a great way to buy a house and not have to pay closing costs out of pocket.
- Attack the principal.
Another great way to
save money on your mortgage is to add money to your payment every month.
Also paying half the mortgage every 2 weeks
instead of once per month is a super way to bring down the interest
faster. Adding just $100 per month towards the
principal will speed up how much you actually own outright of your house
since about the
first 20 years or so are devoted mostly to paying off the interest! It
also obviously increases the equity in your home much faster!
- Financing through the seller. Instead of traditional mortgages, seller financing is where you pay the seller directly. You don't have to borrow the money but instead you agree on an interest rate between you and the seller and then pay him directly every month. This is a great way to get into a home if you don't have good credit and can't get a loan. The downside of this mortgage method is that most sellers aren't going to want to wait 30 years to collect! These are generally short-term loans and while you won't pay closing costs, etc., you may be looking at a 3-year contract.....though it all depends on the seller. Sellers usually agree to this kind of financing so that they don't have to pay capital gains taxes and the owner actually still owns the property until you've paid in full....so if you renege on the debt, he still has the house.
- Don't believe everything you read or see on TV. Lenders need your money so they need you to take out a loan as much as you need to take one out! Don't take anyone's word for the lowest interest rate. Do your homework. Investigate other lenders in your area and look on the Internet. Check the lowest loan rates and go prepared to the lender you've chosen. Ask them to match the rate that you've found or walk. It's as simple as that. If they want your business, they will reconsider. Loans and interest rates are negotiable! Even getting a reduction of 1/4% is a huge savings over time.
- Assuming. You can assume an existing mortgage on a home that you are buying. You won't have to go through the hassles of getting a new mortgage and you also avoid most of the costs attached to a new mortgage. If the seller also has a lower interest rate, you come out on top! Make sure that the existing mortgage is transferrable. You'll end up paying the difference between the purchase price and what's left owed on the house. This is a great way to save on a mortgage when there is already a mortgage on the house. But in recent years, lenders have gotten very funny about going with assumed mortgages simply because people that have assumed them have defaulted on them. As the lenders caught on to this practice, they have made it less lucrative and you should know that as a seller, if you are attempting to allow someone to assume your mortgage, you may end up liable in case the assuming party defaults. Assuming is not the recommended way these days to save money on your mortgage though it is still an option.
Mortgage Savvy and How to Save on your Mortgage
In summary, these are a few tried and true ways to make the most of your mortgage payment and covers many different scenarios.
Most importantly in the mortgage game, make sure your credit is stellar before you try and buy a home. You'll be in a much better position for negotiating both price and financing terms.
As the video points out, there really is no reason these days to assume a mortgage and if you enter into an assumed mortgage, you as the owner might get burned so check out other options!
If one of these mortgage styles works for you, do it.......and if not, maybe reducing some of the principal owed is the way for you to go.
If you don't have the ready cash for closing costs, consider the add-on idea to the overall cost but just remember that the home will have to appraise out to coincide with the cumulative cost of the home and the closing costs.
And last but not least, if you find a good rate somewhere, chances are someone else will match it or better it. Don't be afraid to pull out the negotiation card!
Always investigate what your options are and once informed, you will be that much better prepared to make solid decisions.
Wishing you much luck in learning how to save on your mortgage!
Are Assumable Mortgages Still Around?
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