3 Ways To Save On Your Mortgage
Taking out a mortgage is a huge responsibility. Your home is likely going to be your most significant investment, which is why finding the right home loan is essential. Rushing through the mortgage process is a mistake that you do not want to make. Not taking the time to find the right mortgage can cost you dearly over time. If you are buying a home and plan to finance, here are three ways that you can save on your mortgage.
Have A Large Down Payment
While not everyone can save up tens of thousands of dollars for a down payment, if you can do so, you should strongly consider it. When applying for a mortgage, a larger down payment may help you qualify for a better interest rate, which will save you thousands throughout your loan. If you have a downpayment that is less than 20 percent, many lenders require that you carry private mortgage insurance, or PMI, which will amount to hundreds of dollars tacked on to your monthly payments. Putting down at least 20 percent will allow you to avoid PMI.
Buy Mortgage Points
Another thing that your mortgage lender may offer is mortgage points, which are fees that you can pay to reduce your interest rate. A mortgage point will usually set you back one percent of the mortgage value. One mortgage point will usually reduce your interest rate by 0.25 percent. While mortgage points can help you save over the lifetime of your mortgage, make sure that you know where the breakeven point is for your investment and how much you will save each month by purchasing points.
Go With A Shorter Loan Term
When shopping around for a mortgage, you'll likely be looking at either a 15-year or a 30-year mortgage term. While the lower monthly payments of a 30-year mortgage may be tempting, if you are looking to save, shorter-term home loans are the way to go. With a 15-year loan term on your mortgage, you will likely have a lower interest rate and also pay less in interest overall. Your loan will also be paid off sooner when you go with a shorter loan term.
If you are taking out a mortgage, there are a few ways that you can save. First, a substantial down payment can help you avoid PMI and also help you qualify for a lower interest rate with your lender. Another way to save is by purchasing mortgage points to lower your interest rate. Finally, if you want to save, you may want to consider going with a shorter term for your loan.