4 Ways to Save on Your Mortgage

According to Business Insider, Americans spend roughly 37% of their budget on housing. On top of that, additional housing expenses such as private home insurance and taxes could quickly raise that percentage, crippling your budget even more.

But what if you had ways to cut down on mortgage expenses, consequently saving money on your housing budget?

Read about four ways you can save on your mortgage.

1. Seek Financial Advice
Many can attest to the economic changes that have come about post-COVID from job loss, business decline, more debts, and other financial crippling misfortunes. A prudent thing to do would be to seek financial aid from a mortgage provider or professional as they would be in the best position to steer you the right way, depending on your mortgage terms and your current financial status.

The professional can guide you on the best decision for your mortgage, whether to refinance, amortize, or recast your mortgage in a way that saves your home's equity and minimizes your financial strain.

2. Recast or Refinance Your Home Loan
Recasting your mortgage means you make amends to your present home loan to amortize a new payoff process. However, recasting occurs after you have made a lump sum payment towards your total mortgage payments or you've made extra payments over the years. With recasting, your lender can change the payment process depending on your loan balance, resulting in lower monthly payments.

On the other hand, refinancing means you get another loan altogether, either with lower rates or a difference in time which ultimately changes your monthly payment. For example, you can refinance your mortgage from a 30-year to a 15-year loan, meaning you pay less interest overall. If the interest rates have plummeted, you can get a lower interest, resulting in smaller monthly payments.

3. Pay Extra on Your Mortgage
When you pay extra, you pay in advance, so you'll finish your payments faster, depending on how much extra you pay towards your mortgage. Ultimately, this saves you from paying additional interest you would otherwise pay if you paid mortgage interest for the home loan period.

You can pay extra on your mortgage in two ways: make bi-weekly payments or make actual extra payments. With bi-weekly payments, the math states that a year has 52 weeks, so with bi-weekly payments, you'll have a total of 13 payments, unlike 12 payments from monthly payments.

Unfortunately, some lenders may deny you from paying bi-weekly, or hidden fees may cost you for making these payments, so be informed about this mode of payment before you start.

4. Cut Off Private Mortgage Insurance (PMI)
Conventional mortgages may require you to pay private mortgage insurance if you can't afford to pay 20% of the property's value. If you fall under this category, it means you pay a certain amount of your loan balance annually for as long as the lender views you as high risk or until you accumulate enough equity in the home.

Unfortunately, these are additional housing costs that eat up your budget, causing you to spend more on your mortgage than you should.

To cut off PMI, you can request your lender to cancel these payments once you've accumulated the needed amount and your balance lies below 80% of your home's equity. If your home value has appraised, you can still ask to be PMI-free if your balance surpasses the required amount. Dropping this insurance will ensure you save up on these additional expenses.

Mortgage payments can depress your budget, but only if you let them. Use these four tips above to ensure that you save every penny from your mortgage and continue to secure your home's future.

For more information about mortgage services, feel free to contact us today.