How to Save Money on Your Mortgage or Mortgage Refinancing
Your home.
It’s where you raise your kids. Where you celebrate the special occasions in life. Where you go after a long day at work to enjoy the little moments with your spouse or kids. Whether you consider it your long-lasting family home or a starter until you grow your family, homes have meaning.
And that home is a valuable investment.
But that doesn’t mean that you still can’t save a little bit of money as you afford payments on this special place you call home. Mortgage payments often take a large percentage of our income, and for good reason. These home purchases and payment plans aren’t often made without detailed planning and intentional savings. Often, getting that down payment on a house is the first step in making this important investment. But after that, you’ll probably continue to pay for your home for years to come.
Unless you’re in a special circumstance where you can pay straight up cash for your home, you’ll develop a payment plan with your bank to repay for your house. This comes in the form of a mortgage.
Saving money on your mortgage is a great way to develop financial wisdom and success. As you explore other ways in saving money in everyday life, your mortgage payments are another area to consider cutting some costs.
To help you get started in this worthy endeavor, here we share the value of saving money on your mortgage as well as practical and helpful ways to save money with mortgage payments and refinancing options.
Why Save on Your Mortgage?
You might hear that there are certain types of debt that are okay to have and some that are best without having. Credit card debt, for example, racks up high-interest payments, making it a challenging form of debt.
A mortgage, on the other hand, is a form of debt that can also be considered an investment in your family and in your future. After all, home prices fluctuate from time to time, which may provide you the opportunity to make money when you eventually sell your home.
Saving money on your mortgage doesn’t have to be frustrating or tedious. Here are some reasons why saving on your mortgage is a great idea.
Spend Less on Interest
Part of a home loan is the interest rate that’s tacked on that you have to pay for borrowing the money. The longer you’re left paying off your home, the longer you’re paying interest on that home. By saving money on your mortgage, you have the potential to lower the number of interest payments you’re scraping up for the bank.
Sense of Accomplishment
While mortgages aren’t considered the worst form of debt, it’s also not something you want to continue paying for decades upon decades. There’s a great deal of satisfaction and joy that comes with paying off your home and being the sole owner, rather than still having that loan from the bank. Being able to say that you own your own home is worth the work and effort in saving money on your mortgage.
Spend Your Budget on What You Want
A mortgage takes up a large percentage of your monthly budget. But what would happen if you reduced that amount, or eventually got rid of it altogether? With that freedom in your budget, you can spend money on what you want to spend on, whether that’s a vacation, growing your family or home improvement projects.
Seeking out ways you can ease this large monthly expense to pay off your loan faster and decrease your monthly payment. While your actual savings will depend on the mortgage, the duration of the mortgage, your interest rate and the monthly payment, taking even small steps can help you in managing your mortgage well.
Ways to Save on Mortgage Payment Plans
As such an important investment as a mortgage, there are some easy and some more complex ways to save money on your mortgage. As you navigate which mortgage savings opportunities are right for you, here are a few ideas to help you get started.
Make an Extra Payment Every Year
Considered one of the easiest and simplest ways to save money on your mortgage overall is to make an extra payment each year. These extra payments are deducted from your overall principle (the actual cost of the mortgage) rather than the interest accumulated from the mortgage. By lowering your overall principle, the amount of interest you need to pay also lowers. If you have the means and flexibility to add on extra payments every year to your mortgage, you can end up saving a great deal on your monthly mortgage cost.
Even better, consider making regular extra payments more frequently. If your lender allows and you have the means, making even more payments toward your principle can drastically reduce the length and severity of that loan. Reducing your principle faster helps in reducing interest costs and your overall burden of a mortgage.
However, before you start adding extra payments, be sure you’re allowed to make extra payments without additional fees. Know your opportunities for savings and find ways to make those extra payments work for you.
Use Budget Excess to Pay For Your Home Loan
If you’ve found some extra wiggle room in your monthly budget, consider using that extra money to pay off your home. While it may be tempting to blow that extra cash on entertainment or a fancy dinner out, choose once in a while to add that money back into lowering your mortgage principle. Just be sure you’re also accounting for having savings accounts and fueling other funds that are important in your budget.
Eliminate the Private Mortgage Insurance
Private Mortgage Insurance (PMI) is added on as a precaution to protect your lender if you’re borrowing more than 80% of the value of your home. But this extra percentage cost on your home can be avoided. By making your down payment more than 20%, you won’t have to pay for that extra protection. Removing that extra payment can help you save a great deal overall.
If you’ve already purchased a home where you’re borrowing at least 80% of the value, you can request to remove that insurance cost once you reach below that 80% mark. Have a conversation with your lender to ensure you can map out a plan for removing this cost to help you save money.
Find Cheaper Insurance
If you’re not satisfied with your home insurance, consider your options for finding a cheaper policy. Whether this insurance cost is part of your home payment or not, getting a better insurance rate can help you save on those added costs. Remember that lenders may have different requirements for what type and level of insurance you have on the home. Before switching policies, be sure you still meet these requirements.
Refinance Your Mortgage
Refinancing a mortgage means getting a lower interest rate to save money. This can lower the monthly payment you’re responsible for while also helping you save on interest payments. While this is often a more involved process in working with your lender, it can be a great opportunity to manage your money well with your mortgage payments.
Ways to Save in Mortgage Refinancing
As you explore how you could cut down on your payments every month for your mortgage, refinancing may be a helpful process. Considered one of the most common ways to save money, lowering your overall interest rate on your mortgage can bring high savings.
Do Your Research
Choosing to refinance your mortgage is all about timing. Before committing to refinancing your mortgage, be sure you’ve shopped around for lowest rates and comparing your options and finding the lender that has high ratings and great reviews. If rates are low, refinancing makes more sense in being able to find a lower interest rate that meets your needs.
Calculate Your Own Numbers
Once you find a lender that works well for what you want to accomplish, be sure you calculate your numbers in refinancing before contacting them. Running the numbers yourself – with your actual mortgage information and the potential for a lower interest rate. Be sure you also factor in any additional refinancing fees you may be responsible for. Knowing your numbers before contacting helps to ensure you’re not missing out on any other worthy opportunities.
Have a Plan for Those Savings
If you’re able to successfully lower your mortgage payments through refinancing, be sure you have a plan for the excess money in your budget. Don’t let it go to waste. Use it to make additional payments on your home or cover other essential payments.
Save on The Place You Call Home
Your home is important to you. Be confident in your mortgage payment plan with these effective ways to save on that monthly payment. Whether you find ways to reduce your payment overall or choose to refinance or a combination of both, knowing your steps to save money on your mortgage can help you pursue your financial goals today and for the future.