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How Paying More on Your Mortgage Can Save You Money

It’s the American dream to own your own home and dreamers will go to any lengths to accomplish this even if it means borrowing thousands of dollars to be paid back over a 30 year period. It’s quite an obligation to make 360 payments month after month with the bulk of the money going toward interest, at least in the beginning.

 

The interest on an average home over a 30 year period can account for twice the cost of the home.  Interest is working against you 24/7/365.  Wouldn’t it be wonderful if you could pay off your debt years sooner and save thousands of dollars? 

 

You can.  It just takes discipline and perhaps a little budget adjusting. It’s no secret that paying the mortgage twice a month, instead of only once will save you thousands and pay off your debt years sooner.  Some call it the bi-weekly mortgage plan.

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Make Mortgage Lenders Compete For Your Money

Selecting a mortgage for your home could be the most important financial decision you will make.  It’s an obligation you assume for many years and a small difference in any part of the negotiations can make a big difference in your monthly payments.

 

Mortgage lenders want your business so don’t be afraid to negotiate.  Do your homework and let them know you’re shopping around for the best deal.  The more you know, the better position you’re in to bargain.

 

It’s your money and worth the effort.  Rarely are rates and terms engraved in stone in the negotiating stage.  Even a quarter point better interest rate obtained can save you hundreds or even thousands of dollars in the long term.

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Plug in Points to See How Your Financing Will Pay Off

One of the most innovative financial markets is the home mortgage loan sector.  And, when you toss points into the mix it adds convolution to an already complicated process.  Most buyers don’t understand the concept of points and hesitate to ask or go to the trouble to learn about the process.  They become overwhelmed and can be at the mercy of whatever the lender offers.

 

It’s actually quite simple.  Points are fees paid to a lender for a loan.  The points are usually linked to interest rates with the more points you pay for, the lower the interest rate.  You can view them as pre-paid fees.  It’s sort of pay now with points or pay later with interest.

 

If you have the cash on hand to pay points and you still can’t decide if you should pay them to get a lower interest rate ask yourself what you would do with the money if not spent on points.  If you’re buying a home you probably have many needs for the extra money but don’t be short-sighted.  Invest for the long term.

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Is Refinancing Going to Help Save on Your Mortgage?

 

Are you bogged down in debt?  Are your monthly home mortgage payments rising each year and getting harder and harder to pay?  If this situation sounds familiar, you may have considered refinancing your mortgage.  But, will it help?

 

When you refinance you’re simply taking out a new loan to pay off the existing one.  It only makes sense to do this if you obtain a lower interest rate enabling you to save money. 

 

Usually, there are two good times to refinance.  If you have an adjustable rate mortgage (ARM) and you’re faced with a continual interest rate rise.  You can refinance to obtain a fixed rate mortgage and avoid the higher payments.

 

Even if you already have a fixed rate mortgage, it might pay you to refinance if you can secure a lower interest rate.  If you’re experiencing a cash flow problem and want to refinance to lower the payments by extending the term of your loan this is not a good reason.  With an extended term you’ll be paying more over the years remaining that you own the home.

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Two Ways to Save When You Buy a Home

 

Buying a home is probably the largest investment you and your family will ever make.

Unless you’re wealthy, few people buy homes and pay cash.  Rather, they make a small down payment and obligate themselves to a financial lender for a term of usually 30 years.  In this case, the lender determines the interest rate and gives you a thorough financial background check.

 

There are at least two other ways to buy the home of your dreams and probably save money:  assuming the existing mortgage or owner financing.  Either method usually saves you time, trouble and money. 

 

If you’re trying to assume a mortgage first make sure it’s assumable and transferable.  Many mortgages have a due on sale clause that states if the owner sells all or part of a house the entire balance becomes due and payable on demand.  A lender may be willing to overlook a non assumable mortgage is you’re able to make good any overdue payments and agree to do further business with the existing lender.

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