8 Super Smart Ways to Save Money on Mortgage

 

While the average American spends nearly $1,600 per month on housing, there are ways to save money on your mortgage. Using roommates and refinancing your loan can lower your payment. However, refinancing only makes sense if you plan to stay in your home for at least a few years. Otherwise, it is worth considering other options. Here are 8 Super Smart Ways to Save Money on Mortgage

Refinancing your mortgage

Considering refinancing your mortgage? Here are the advantages and disadvantages of refinancing your mortgage. The most important benefit of refinancing is a lower monthly payment. Although it is not the most sensible plan in the long run, refinancing may be necessary for some people to save money on bills and keep their homes. Refinancing can also help you pay off the principle of the loan faster and save you money over time. Once you have paid off the principle amount, you can refinance again when you need more money. To get the best possible deal, compare the new monthly payment to the old one. On average, refinancing a loan can save you about $204 per month and $2448 annually.

If you think refinancing is a good option for you, do your math and compare rates with other lenders. Then, select the lender who offers the best price. Once you have narrowed down the options, collect your financial documents, lock in your interest rate and confirm the terms of the new loan before closing. This is one of the 8 super smart ways to save money on mortgage

Paying your mortgage every other week

The benefits of paying your mortgage every other week outweigh the disadvantages, though. This method of payment builds equity faster and can free up more money for other financial obligations. Moreover, biweekly payments don't affect your credit score, as lenders report on time and late payments every month. However, biweekly mortgage payments can interfere with your overall financial plan and may detract from savings for retirement or other expenses.

In addition to saving money on your mortgage, biweekly payments help you avoid the annual interest penalty. The reason is that your payment is not applied immediately to your mortgage. Instead, the mortgage servicer holds onto the second payment for two weeks, thus nullifying the effect of the extra payment. In addition, biweekly mortgage payments may not penalize you for making early payments, so you'll avoid paying a large interest charge in the end.

Avoiding paying PMI

Avoiding paying PMI on your mortgage is an option that can help you avoid mortgage insurance. Many conventional mortgage lenders require this type of insurance, and some government-backed loans require it as well. While it can be beneficial for some borrowers, you should avoid it if you can. If you can't pay this insurance, consider a piggyback mortgage instead. However, keep in mind that this type of mortgage will have higher monthly payments.

One way to avoid PMI is to get a lower-rate mortgage. The rate on a piggyback mortgage is higher than a traditional mortgage, but it will save you money. Piggyback financing is a loan that allows you to avoid paying PMI on your mortgage as long as you pay a minimum of 10% down. This second loan will cover the remaining money needed to purchase your home, leaving you with just a 10% down payment.

Budgeting

One way to save money on your mortgage payment is to make sure you have enough disposable income to pay off the loan. When you first buy a home, you may have less disposable income than when you were renting, so budget accordingly. If you're paying more than you had planned to pay for the home, consider saving for an emergency fund and home maintenance. A rule of thumb is a percent of your mortgage payment for annual preventative maintenance.

Homeowners should review their home budget at least four times a year and monthly. This allows them to keep track of expenses such as utility bills and maintenance costs. It also prevents them from overspending and getting into debt. If you are a new homeowner, make sure to review your budget monthly. You'll also see where you need to make changes in order to make the most of your budget. It may sound like an impossible task, but budgeting for these costs is a great way to stay on track.

Investing in risk-type investment vehicles

Investing in risk-type investment vehicles is a way to save money on a mortgage, but be sure to consider your own financial goals first. There are many financial goals people have throughout their lives, including saving for college, a new home, a child, a vacation, emergency savings, and more. Investment vehicles can make saving for these goals easier and more convenient. With the interest and profits they can earn, you can save enough money to reach these goals early.

Low-risk investment vehicles are safe choices for a down payment or an emergency fund. CDs and high-yield savings accounts provide a reasonable return on your money. But if you're looking to save money on your mortgage, investing in high-yield savings accounts may be the way to go. Investing in bonds or CDs will help you achieve short-term goals, such as a down payment on a home. Investing in stocks and bonds can provide you with a higher return than cash, but these investments are often volatile, and may be less transparent.

Saving for a down payment

If you're saving for a down payment on a mortgage, the best way to accelerate the process is to put your savings on autopilot. To maximize your savings, you can automate your contributions to your down payment fund by setting up recurring deposits through direct deposit or an online savings account. You can set up an automatic transfer to your Ally Bank Online Savings Account, which will give you an automatic increase in your down payment fund. Another way to save is to freeze your monthly expenses.

While saving for a down payment on mortgage is a great goal, it's also important to prepare your finances for the future. Saving for a down payment can be a multi-year process, so you may need to make significant changes to your lifestyle. You'll also need to prepare your credit profile for mortgage approval. You can check your score for free through Experian. This report will help you prepare your credit profile for mortgage approval.