Mortgage Loan Check-Up, Could You Save More Money?
How's the life of your loan?
What is a Mortgage?
A mortgage is another name for the deed that explains the terms of the loan on real estate or property. Generally, people don't have thousands of dollars to buy a home. The answer to home ownership is to go to a big bank and ask to borrow money for such a large purchase. Banks make money by lending the money to the borrower with an agreement to pay the money back and add a little interest to the loan which is repaid in monthly installments.
It's really boring information unless you work in the industry. So what do people do?
They go through all the hoops to buy a home and then once the deal is closed, they pay their monthly mortgage payments and don't think about it much.
It might pay to re-evaluate the terms of your loan. There are a few ways that you might be able to reduce your mortgage payments and save thousands in the long term.
Do you know what the terms of your loan are?
What is your rate?
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What is PMI?
Private Mortgage Insurance
Many times banks will require borrowers to carry Private Mortgage Insurance. Typically, if you put less than 20% for your down payment on the property, the bank or lending institution can tack on the PMI. They charge you money until you have about 20% equity in your home.
It might pay to review the terms and type of loan that you currently have on your property to see if there is a PMI and if you can have it removed. Sometimes it is just a simple matter of writing a letter to the bank to request that the charge be removed. A loan officer should be able to explain if and when this can happen if they required PMI.
Is it time to REFI?
Refinancing Your Loan
Is it a good time to refinance your loan? It might pay to call your lender to find out the details of your loan. What was the interest rate? You might be able to secure a better rate which could drop your monthly payment.
The real estate market and the finance sector are extremely volatile. The rates can change every single day. What might have been a great rate when you borrowed could be high at the current date. It's well worth your time to investigate these details. Call your lender and find out if it's feasible for you to refinance the terms of your loan. Caution is required because some lenders may charge loan origination fees or they may offer to allow you to borrow more money for the equity you've gained in the home. I am personally against taking equity out because then I'm back to square one. My idea is to pay my mortgage off as soon as possible for the lowest rate I can acquire.
For example, I can remember when interest rates were 12% and right now, I've seen rates drop to 4% and lower at some institutions.
What about reducing the length of the loan?
Many people are now taking advantage of 15 year mortgage loans rather than typical 30 year loans. It doesn't hurt to call a lender to find out if it makes sense for you to renegotiate the terms of your loan.
It's also a good idea to find out how your payments are divided. I know many people who include additional payments on their mortgage with instructions for the lender to apply the extra money to their principal portion of their loan. This can reduce your loan by several years if you are consistent in doing so. Paying an additional $50 dollars a month can make a huge difference depending on your loan amount.
It always pays to understand the details behind the terms of your mortgage. Taking a few minutes can save years on the length of time and money you will repay for your home loan.