Have you purchased your dream home by taking out a mortgage loan? Most people do so and if you are among those, you probably already know that you can save your hard-earned dollars on a mortgage by making the loan payments timely. This will prevent you from incurring high interest rates on future your home loans. However, if your financial condition has deteriorated due to which you cannot afford to make the payments, there is still hope to save your precious home. You may talk with your lender and opt for mortgage modifications whereby the interest rate and the terms and conditions get changed according to your ability to pay. Thus, you will be able to pay down the home loan and save money in the long run.
4 Tips to save money on mortgage
Below are 4 tips on how you can pay off the home loan on time and save money on your mortgage.
- Try to make extra payment – You should try to make extra payments on your mortgage loan if you want to save money. Paying extra is the fastest way to lessen the outstanding balance on your home loan. As such, making one extra payment in a year will reduce at least some burden of your home loan. You may either set up biweekly payments to diminish your balance soon or mail in one extra payment every year. Biweekly payments may be easy since they divide the balance over a two week period. This makes it easier for you to make the mortgage payments.
- Obtain a low rate of interest – If you are finding it difficult to afford the loan payments, you may refinance your existing loan. Refinancing means lowering the rate of interest on your present loan so that you can manage to make the payments. You will be usually be required to have a good credit score in order to become eligible for improved refinancing. If you make the payments on time, you will be able to qualify for a low interest rate. By refinancing your loan, you can save thousands of dollars every year that would, otherwise, have gone in the high interest payments.
- Modify your present loan – It may happen that you’re charged a high interest rate on your present home loan due to which you cannot afford to make the loan payments. If this is your case, then it may be best to modify your existing loan. You need to know that mortgage modification is altering the terms and conditions of your present loan so that you can make the monthly payments within your capability. The modification process takes place either by lowering the interest rate or by increasing the loan term period. Often, with mortgage modification, you can pay off your mortgage payments easily.
- Do away with PMI – PMI, also called, Private Mortgage Insurance, is an additional insurance that a home buyers provide their lenders who is managing their loan. Typicaly, PMI is worth more than 80 percent of the value of their new home. The lenders use PMI to protect their interest in the property. You can avoid paying the Private Mortgage Insurance by making the 20% down payment on your home loan. PMI typically expires once the home loan’s balance is down to 80% of the total value of the property. Get in touch with your mortgage company to terminate PMI. This will help you save thousands of dollars on your mortgage.
By following the above tips, you will be able to save a lot of money on your mortgage.
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