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Ways to save on your mortgage

Black homeowner couple calculating how to save on mortgage

Ways to save on your mortgage

As a homeowner, chances are that your mortgage is one of your biggest monthly expenses. The good news is that there are many ways to save on your mortgage so that you can keep more money in your pocket.

Here are some of the top ways to reduce your monthly mortgage expenses.

1. Pay a little extra each month. If you have some wiggle room in your budget, consider rounding your mortgage up an extra $100 or $200 each month. This will shrink your mortgage balance faster, which means less interest paid over the life of the loan.

When paying more than the minimum payment, be sure that the extra amount is paid to the principal balance only.

2. Make bi-weekly payments. One of the simplest and most effective ways to shave years off of your mortgage term and to reduce expenses is to pay biweekly. This means you’ll divide your monthly payment amount in half, and then pay the half payment every other week.

Over the course of the year, you’ll have made an extra mortgage payment. When making bi-weekly payments, ask your lender to apply the extra funds towards the principal balance.

3. Refinance your existing mortgage. The housing market ebbs and flows, but when market trends are favorable, take advantage of them! Today’s market is the perfect example. With near-historically low-interest rates, now is a great time to refinance.

A lower interest rate lowers your monthly payment. Refinancing can also be used to shorten your loan term or to remove private mortgage insurance (PMI).

4. Recast your mortgage. Expecting an extra chunk of cash from a bonus, tax refund, or inheritance? If so, set it aside and apply for a mortgage recast. This involves paying a lump sum amount towards the principal balance. Your lender will then recalculate the loan amortization schedule based on the reduced balance.

Recasting your mortgage lowers your monthly payment, which saves you money in the short- and long-term. Be aware that some lenders charge a recasting fee, and some require at least a $5,000 lump sum payment.

5. Work with the right lender. As a homeowner, it’s important to find a lender that cares. You don’t want to give your hard-earned money to a bank that is only in it to make a sale. By working with a caring and experienced mortgage lender, you’ll have access to the people and resources you need to find a loan product that best fits your finances and current life situation.

6. Drop private mortgage insurance. If you purchased your home with a conventional mortgage but didn’t put down at least a 20% down payment, odds are that you’re paying private mortgage insurance (PMI).

While a smaller down payment means you got your dream home for less upfront, PMI costs begin to add up over the years.

The good news is that you don’t have to pay PMI forever. In fact, you can ask your lender to cancel PMI once you have 20% equity in your home. When your mortgage balance is below 80% of your home’s appraised value, PMI is no longer required

Before PMI can be removed from the loan, your home must be professionally appraised to confirm its value. Once the appraisal is complete and it’s confirmed that you meet the 80% threshold, you can enjoy being a PMI-free homeowner!

Final thoughts

You’re stuck with your mortgage for 15, 20, or even 30 years, so why pay more than you should? With these tips, you can save hundreds, if not thousands of dollars on your mortgage.

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