How To Save Money On Your Mortgage

Strategies to Reduce the Long-Term Cost of Your Mortgage

When shopping for a mortgage, many buyers focus primarily on securing the lowest monthly payment. However, it’s crucial to consider the overall cost of the mortgage, including interest payments and fees, to maximize long-term savings. Even if you already have a mortgage, there are several strategies you can employ to reduce the total amount of interest you’ll pay. Most of these strategies involve accelerating the repayment of the loan, which in turn lowers your long-term interest costs.

Here are some effective ways to reduce the long-term cost of your mortgage:

1. Compare Offers

When searching for a mortgage, it’s beneficial to obtain offers from multiple lenders. Interest rates and terms can vary significantly between lenders. If your credit is less-than-ideal, don’t settle for a high-interest rate without exploring better offers. Comparing offers using the Annual Percentage Rate (APR) is crucial, as it encompasses both the interest rate and any associated fees, giving you a clearer picture of the overall cost.

2. Consider Fees

Mortgage deals often include various fees or points that can increase the total cost of borrowing. Scrutinize these fees carefully and don’t hesitate to negotiate or challenge those that seem excessive. Always compare mortgage offers based on the APR, which provides a more comprehensive view of the costs beyond the interest rate alone.

3. Shorten the Term

If you plan to stay in your home for an extended period, opting for a shorter mortgage term can substantially reduce your interest costs. While this will increase your monthly payment, it will lead to significant savings over the life of the loan. For example, switching from a 30-year mortgage to a 15-year term could save you $66,364 over the life of a $100,000 mortgage with a 5.75% interest rate versus a 6% rate.

4. Pay Bi-Weekly

Switching to bi-weekly mortgage payments instead of monthly can reduce the total interest paid. Although each payment is slightly higher, you make 26 payments annually, which equates to 13 monthly payments instead of 12. This extra payment helps to reduce the principal balance more quickly and, in turn, decreases the total interest paid over the life of the loan.

5. Cut the PMI

If your down payment was less than 20% of the home’s purchase price, you might be required to pay private mortgage insurance (PMI). Once your mortgage balance drops to 80% of the home’s value, you can request to have the PMI canceled. This may involve a reappraisal of the property, but the potential savings can be substantial.

For additional tips on saving money on your mortgage, visit LendingTree.

By implementing these strategies, you can significantly reduce the overall cost of your mortgage and save money in the long run.