5 Easy Ways to Save Money on Your Mortgage

Your mortgage is probably the biggest monthly expense you have. It’s important to keep up with your mortgage payments each month. However, sometimes it’s not as easy as it sounds. Here are some ideas to save money on your mortgage.

1. Avoid Paying Private Mortgage Insurance

Private mortgage insurance, or PMI, is a mandated additional payment on mortgages where the borrower puts less than 20% down on the home purchase. Paying PMI each month really adds a lot to your monthly debt. PMI is typically around .5% or 1% of the annual amount. Depending on how much your new home cost, the PMI portion of your monthly mortgage payment could be around $100. If at all possible, avoid paying PMI by putting at least 20% down on your home purchase. Even if it means waiting a little longer to buy, the extra savings can be worth it. If you’re already paying PMI, you might be able to get rid of it. If the Loan to Value ratio on your home is 80/20, you can apply to your lender to drop the PMI. Your mortgage paperwork will have details on how to apply.

2. Make More Frequent Payments

Most people assume that their mortgage payment is due once a month so that’s when they should pay it. They may even sit on their mortgage payment until the deadline comes around. However, there’s a little known tactic that can help you save money on your mortgage. Instead of paying once a month, pay twice a month. You can split the payments up so you don’t end up paying any more than you did before. The amount of interest you’ll save by doing this really adds up over the life of the loan. You see, when that first payment is applied to your loan, that’s a whole two week’s worth of interest that you’re saving on that payment amount. When you’re talking about hundreds of thousands in a loan, that’s a lot of interest.

3. Make One Extra Payment a Year

Another way to save money on your mortgage and pay off your house quicker is to make just one extra payment every year. Since this isn’t obligatory, the amount can be anything of your choosing. Just be sure you don’t need to cash for something else important. Even if you just make an extra $500 payment each year, the savings really adds up, depending on the interest rate you’re paying on your loan. Some ideas for getting the extra money for an extra mortgage payment include, borrowing money by taking out a title loan, using your tax refund, or using money from a holiday bonus check from your employer.

4. Do a Refinance

Interest rates on mortgages are always going up and down. Most people wind up with a mortgage interest rate that they didn’t necessarily choose. In the world of real estate, you’re kind of stuck with whatever the lender offers at the time you’re ready to buy a house. Of course, if you were unlucky and bought at a time when interest rates were high, you also have a lot of room to save money on your mortgage. Now that interest rates have lowered, you might be able to get a better deal on your mortgage by refinancing. This is especially true if your credit score has improved since you first bought your house. Lenders give more favorable rates to those with higher credit scores. Take advantage of lower interest rates and a higher credit score by refinancing your mortgage. You’ll save thousands of dollars in interest with this one simple tactic.

5. Rent Out Part of Your Home

If your mortgage payment is getting to be a little too much, or you’ve suffered a financial setback, you can save money on your monthly mortgage by taking in a tenant. Rental income can help to offset your monthly mortgage payment by however much you charge your tenant. This is very doable, especially if you have a room over the garage or a finished basement complete with a bathroom. Be sure to check with your local town government before doing this, since you may have to apply for a permit to rent out a portion of your home. Confer with a lawyer to prepare a formal lease between you and the tenant. If you don’t like the idea of a stranger living in your home, consider renting to a favorite niece or nephew.

These are five easy ways to save money on your mortgage. In these times, everyone needs a little financial help every now and then. Hopefully, one or more of these ideas will help you get in a better financial position.

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