How To Save On Your Mortgage
Anyone who has purchased a home knows that it is important to learn how to save on your mortgage. Looking at the mortgage paperwork is almost frightful when you see how much interest will be paid over the lifetime of a 30-year fixed rate mortgage. There are various methods to saving money on a mortgage, but only you can decide which techniques work into your financial situation.
- Save money on your mortgage by canceling PMI. One of the additions to a mortgage payment is the private mortgage insurance that is required by many lenders when the homeowner is unable to provide a 20% down payment. Once the 20% home equity threshold is reached, the PMI is supposed to stop automatically. Unfortunately, the law that requires automatic cancellation was put into place in 1998 and applies to mortgages that started after July 29, 1999. If you have a mortgage that started prior to this date, and your loan to value ratio is 80% or less, you should request that the private mortgage insurance premiums be cancelled.
- Try to make additional payments on your mortgage. Just one extra payment per year will save you thousands of dollars in accumulated interest. Check with your lender before making extra payments to the principal balance to make sure that your loan does not have a pre-payment penalty clause.
- Refinance your mortgage when interest rates fall. There is the potential for huge savings on your mortgage by a simple refinance. As an added bonus, this may also lower your monthly payments.
- Choose a Fifteen-year mortgage over a 30-year mortgage to save money. There are two perks to choosing a short-term mortgage. You will most likely be offered a lower interest rate with the fifteen-year loan, and you will save thousands of dollars in interest over the lifetime of the loan by paying for a shorter time frame.