If you want to save money on your home mortgage costs, picking a mortgage loan that will cost you less in the long-term is more effective than picking a loan with low monthly payments. The quicker you can pay off your mortgage, the less you will have to spend on interest payments.
If you have already taken out a mortgage, there is still hope! These tips can help to reduce the total amount of interest you’ll pay by increasing the speed with which you repay the loan, which in turn reduces your long-term interest costs.
It always pays to get offers from several lenders when you’re shopping for a mortgage. Offers can vary substantially. Especially if your credit score is low, you shouldn’t accept a high-interest rate mortgage without looking for a better offer.
Don’t forget about the fees
One factor that increases the cost of your mortgage is the fees or points lenders add on to the deal. Look at these carefully, and don’t be reluctant to challenge fees that seem too high, or unreasonable costs such as unnecessary insurance. Compare offers using the annual percentage rate (APR), which includes both the interest rate and the fees.
Shorten the term of your loan
If you intend to be in the house for some time, you can lower your long-term loan costs by choosing a shorter mortgage term. This will increase your monthly payment but enable you to save significantly over the life of the loan.
Make payments more often
Making extra payments helps to reduce the principal, which will then reduce your total interest payments significantly. Choosing to pay biweekly (versus once a month) can cut the amount of interest you pay since your principal decreases more steadily. And, since there are 26 two-week periods in the year, you actually make an extra monthly payment each year, further reducing the principal amount owed.