Owning a house is probably one of those amazing milestones in most people’s lives. Of course, it virtually comes with some extra expenditures, like a mortgage among other things.
In this article, we are going to take you through some strategies that will empower you to save on your mortgage, while at the same time giving you an overview of refinancing options that might just give your budget relief.
1. Refinance Your Mortgage to Lock in a Better Interest Rate
If you have not refinanced your mortgage yet, the time may now be right to think about it. Refinancing, in simple words, shall mean that you take another loan to replace your currently running mortgage at better rates or terms. When the mortgage rates have dropped down since you bought your house, refinancing then can save oodles of money on monthly payments.
Besides, refinancing might be tempting if you are living in cities like Arizona and major cities like Phoenix, in case you are looking at low rates. You can view refinancing options at: https://arnaizmortgage.com/refinance/arizona/phoenix/ if you’d like to see just how much you could save by switching things up.
With a lower interest rate, other than reducing your monthly payments or largest payments, you’ll be in a position to reduce over time the overall amount paid on the mortgage within its life span. Pretty good, huh?
2. Switch to Biweekly Payments
Instead of making one big payment every month, make two small payments every two weeks. How this works: There are 52 weeks in a year, so making that payment every other week means 26 half-payments into the bank, 13 full payments per year, instead of the normal 12.
That may not seem a lot, but that little extra every month pays off your loan faster and whittles down the amount of interest you’ll wind up paying over time.
3. Put Extra Money Towards Your Principal
So you got a little extra money from a tax refund or work bonus? Applied directly to your mortgage principal, it’s one of the great things you can do with that money. Each time you pay extra money toward the principal balance, shaving off a bit is what you are doing to how much you owe. That means you’ll cut down on how much interest you pay over the long run.
That doesn’t mean you have to make big bonus payments all at once. Small additional payments can help, too. Just make sure to let the lender know the extra money should go to the principal balance and not to future interest payments.
4. Shop Around for Cheaper Home Insurance
You perhaps may not know it, but with every month’s mortgage payment, house insurance comes tagging along. That is why, once you find cheaper insurance plans, you will be able to lower the overall mortgage costs It pays to shop around for new insurance quotes every year or so.
There may be more discounts you qualify for. You may have made changes that grant you a discount, such as the installation of a security system or other home improvements that reduce your insurance risk. Even small savings is an easy way to cut your monthly mortgage bill.
5. Refinance to Get Rid of PMI
If you purchased your home with less than a 20% down payment, then most likely you pay private mortgage insurance. The additional expense insures the lender against you defaulting. What many people don’t realize is that once you reach 20% equity in your home, it can be relatively simple to eliminate.
Another effective way of getting rid of this PMI involves the refinancing of mortgage rates. Based on the fact that they are considerably down now, then this is worth considering, provided one is in a position to do so. Money accrued from not paying for PMI means hundreds of dollars saved per month.
6. Opt for a Shorter Loan Term
In most cases, you will be required to begin with a 30-year mortgage. But now that you understand the mortgage better, you can opt for a 15-year mortgage when refinancing. If you can pull off paying more each month, this will save you thousands in the long run. Sure, your month-to-month costs will rise, but you’ll pay a lot less in interest over the life of the loan, and you’ll own your house free and clear in half the time!
7. Recast Your Mortgage
If you inherited money, got a huge bonus, have a bigger budget, or hit it big in that casino jackpot, you might just want to recast your mortgage. Pay one big payment against the principal on your loan, and your lender resets your monthly payments based on the new balance.
The best thing that can be said about recasting is that you end up with lower monthly payments without the headache of refinancing and closing costs. Just make sure your lender offers this option before committing to it.
