If you’re thinking about purchasing a home or just wanting to reduce your current mortgage payment, it’s essential that you understand how to save money. Avoid being saddled with mountains of debt when older; good money management can make all the difference in how much will have left for retirement expenses.
One of the most common financial mistakes is not setting aside enough money into savings for emergencies or large costs. This can leave you in a predicament where you must rely on higher-interest credit cards or other forms of debt to cover unexpected expenditures.
Saving on your mortgage without compromising too much of your budget can be tricky, so here are some tips to get you started.
1. Pay Off Your Loan Early
If you can afford it, paying off your mortgage early is a great way to reduce monthly payments and save a considerable amount in interest over the life of the loan. Depending on individual circumstances and loan size, this could amount to thousands of dollars saved over 30-year term.
2. Consider Refinancing Your Mortgage
If your loan is up for renewal or you’re getting a new one, take advantage of lower interest rates by refinancing to a lower rate and shorter term. Negotiating an interest rate discount could save thousands of dollars over the life of your loan if possible.
3. Reduce Your Mortgage Period
While 30-year mortgages remain the most popular choice, many lenders offer shorter loan terms such as 15-, 10- and 20-year ones. Typically, these have lower interest rates than 30-year ones and can help you build equity faster in your home.
4. Redirect Your Mortgage Payments
Redirecting your mortgage payment to a savings or investment account can be an efficient way of paying down your loan faster. With an online mortgage calculator, you can calculate how much more money you could save by redirecting this form of savings elsewhere.
5. Apply Extra Money towards Your Mortgage
If you receive a tax refund or performance bonus from work, it may be worth applying that money toward your mortgage. Just be sure to consult your lender first to make sure making extra payments is allowed by them.
6. Make Use of Any Extra Cash You Have and Attack the Principal
A great way to pay off your mortgage faster is to utilize any extra funds you may have at the end of each month. This could include leftover money from your budget or small windfalls like holiday bonuses or birthday money you may have received throughout the year.
By taking advantage of your extra funds each month on your mortgage, you could potentially save hundreds of dollars each month. However, be mindful not to spend it on items that do not add value to your life or future financial objectives.