Looking to buy a house? A mortgage is an inevitable expense that people lose sight of and consider at a later stage. The first and foremost is to plan your house mortgage for a smooth buying venture. So, you can consider these money-saving tips to ease out from various barriers and attain financial freedom.
Read on for four ways to save money on your mortgage.
- Plan Your House Mortgage Wisely
Time is an important asset, but its value increases when you hit it at the right moment. It’s essential to plan to avoid fallbacks and risks. A planned budget with certain factors listed below will help you decide whether to go for the mortgage or not. So, make sure to tick all the checkboxes listed below:
- Do you have a good credit score? If not, then improve your credit score.
- Is your debt to income ratio (DTI) under control?
- Plan your budget for every financial year and also take help from a financial advisor.
- Shop for lenders and look out for the best interest rate for your house.
- Distribute Down Payments
Usually, mortgage lender or banks collect down payments every month. However, if you redistribute your down payments into substantially smaller payments, you will reap a financial advantage. For example, if you start paying down payments weekly and bi-weekly. This would reduce a lot of interest and help you financially by completing the loan period as soon as possible.
If possible, you can add a monthly payment to the principal. The amount can be as small as $50-100 to $500. If performed consistently, you can repay the mortgage faster and save up to $20,000 to $50,000 over the loan life.
- Refinance Your Mortgage
If you cannot go for bi-weekly down payments, you can refinance your mortgage after submitting a down payment for a specific period. If you want to live in the house for longer, you should consider refinancing the mortgage. Refinancing has two conditions which you must follow:
- You are going to live in your house for a more extended period. No hurry to sell it off or reconsider for rent or sale.
- You have a better credit score, and the interest rates drop from earlier when you refinance.
If you fulfill these conditions, you will be saving thousands of dollars on refinancing apart from the closing and applying for new loan costs.
- Look Out For Alternatives
Go for short-term loan life. Don’t be stuck with private mortgage insurance (PMI) premiums. If you can pay down 20% of your house price, you don’t need any PMIs. These PMI get tacked on with your monthly payment and increases your interest amount.
If you are considering buying a house as an investment or don’t plan to live in it for more than five years, you can consider switching to an ARM (Adjustable Rate Mortgage). This will separate you from the fixed mortgage interest rate and save you interest amount over the loan life.
To Sum it Up
Look out for these options before applying for a mortgage. These tips are a handful for the financial balance and save you from high interest payments. Hope this helps you and enhances your financial freedom when looking for a house mortgage.