Regardless of the ebb and flow of the real estate market, home ownership is still a fantastic investment. But while it comes with many positives, most people end up saddled with a large mortgage, easily your largest and most longstanding debt. But whether you’re making your monthly payments plus some or just squeaking by, there are ways to save. Here’s a look at five strong options you may have to save money on your mortgage.
Pay bi-weekly. Though most people make their mortgage payments monthly, that is not the only way to go about it. Consider creating a bi-weekly payment plan instead. Every other Friday, deposit half of your regular mortgage payment in a savings account, then pay your mortgage from that account each month. At year end, you will have made twenty-six half payments, or thirteen full ones. Therefore, switching to bi-weekly payments will see you making one extra payment each year without giving it any extra thought. That additional payment will go directly to your principal, helping to reduce the interest you accrue.
Reduce your Private Mortgage Insurance. Many homeowners end up paying private mortgage insurance, or PMI, when the down payment on their home loan was less than 20%. If you find yourself in this situation, try bargaining with your lender. Suggest that they cancel your PMI once the balance on your mortgage falls below 80% of the appraised value of your home. They may end up requesting a new appraisal, but losing the PMI could end up saving you at least a hundred dollars every month.
Argue your property assessment. Changes in the market can directly affect the value of your property. Since the taxes you pay on the property can range well into the thousands of dollars every year, significant savings could be possible. If you think your home’s value has decreased in the last calendar year, and that loss of value has not been accounted for in your property tax assessment, you can argue the rate. Check with your tax assessor, and get your property’s value double-checked. Depending on the local tax rate, you could save hundreds of dollars a year.
Modify your loan. If you find you’ve been unable to make your loan payments due to financial hardship, it may be possible to adjust your loan terms. The term, rate or principal balance could be tweaked to make the overall mortgage fit into your new monthly budget. Most large lenders offer plans for loan modification, as they’d rather see borrowers keep their homes and make monthly payments, even if those payments are less than they were receiving before. Not every borrower will qualify for one of these programs, so contact your mortgage carrier to inquire as to the process. In the end, you may be able to lower your interest rate, reduce your principal, or extend the length of your loan term, all of which will save you money immediately.
Refinance the mortgage. This is probably the most commonly used method for saving. Nearly everyone can refinance their mortgage to enjoy a lower interest rate. You can also reduce your monthly payment with this method. There are costs to refinancing, so make sure that the money you’d save is worth the investment. There are many options, including HARP refinance loans, but with interest rates holding at incredibly low levels, now is a good time to refinance. Even with the fees, you’ll end up saving over a hundred dollars a month.