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Finance

10 Simple Ways You Can Save Money on Your Next Mortgage

Most people often forget about the years of mortgage payments that await them as they prepare to buy a new home. While the prospect of moving into a new home can be rather exciting, it’s important to consider the mortgage payments associated with the home.

For most people, these mortgage payments tend to draw out for years to come, increasing the interest they pay on their homes. In most cases, most homeowners don’t even complete the mortgage payment before they pass away. Some lose their house because they can’t keep up with their mortgage payments.

Fortunately, there are ways to circumvent these occurrences and save money on your next mortgage. So, before you consider moving into a new home, here are some simple ways you can save money on your next mortgage.

10 Ways You Can Save Money on Your Next Mortgage

1. Refinance Your Mortgage

Refinancing your mortgage involves taking out a new loan on your house to pay off the existing loan. This is usually done to take advantage of lower interest rates and favorable terms. Though refinancing sounds enticing, it’s usually done when interest rates on homes have gone down.

Refinancing is sometimes possible if your credit score had significantly improved from when you first took your initial mortgage. As your credit score improves, your chances of securing a better loan with more favorable terms also increase.

2. Increase Your Repayment Rate

One way of saving money on your mortgage is by increasing your repayment rate. You can do this by diverting any extra cash you get through gifts or other means towards paying your mortgage.

As you increase the rate at which you pay your mortgage, the number of years it would take you to complete the payment also reduces. This means you save a considerable sum of money by eliminating the interest you would have paid on those extra years.

However, before you consider increasing the rate of your mortgage repayment, you should check in with your lender to see if there are any penalties or fines for increasing your repayment rate.

3. Drop Off Your PMI as Soon as Possible

When you take out a mortgage to buy a house, you’re usually required to make an initial deposit of at least 20% of the house’s value. However, this is not always possible as some prospective homeowners might not have up to 20% of the house’s value.

Enter PMI, short for Private Mortgage Insurance. PMI is a sum of money that lenders use to protect themselves in case the borrower defaults. It is usually charged as a fixed sum paid monthly based on the amount borrowed, but the amount paid can vary depending on the lender.

This fixed sum is paid until the amount of the loan repaid reaches or surpasses 20% of the house’s value. So if you made a down payment of less than 20% on your house, you could save yourself money on PMI fees by striving to cross the 20% equity threshold.

4. Cut Down on Unnecessary Spending

After buying a house, paying off your mortgage as fast as possible should be your priority, especially when the loan interest rates are high. Even if the interest rates are low, you can still save money on the interest by repaying your mortgage at an earlier date.

A great way to do this is by re-evaluating your spending to see where you can cut down and free up some extra cash. For example, you can review your credit card statement for the past two to three months to see where your money has been going. That way, you can decide if there are things you can sacrifice to help pay off your mortgage a little bit faster.

5. Create Extra Income

Sometimes, even after reviewing your spending, you might find that your expenses are in order. In that case, the best thing to do is to take up an extra gig or side hustle to generate some extra income. Doing this would go a long way towards paying off your mortgage faster, saving you thousands of dollars on interests.

6. Use a Good Lender

One of the major reasons why people struggle with mortgage payments is because their loan conditions are often unfavorable to them. Unfortunately, this is usually the case for homeowners who use the first lender they see that is willing to lend them money for a house.

We advise you to check-in with multiple lenders before deciding which one to go with. Compare their rates and loan terms to see which is favorable to you. You can even persuade a lender to match or give you better terms by arguing that their competitor gave you a better deal.

7. Improve Your Credit Score

When it comes to getting favorable loan terms, your credit score can be the difference between getting a great loan deal and a bad one. People with good credit have more leverage to get better loan terms, whereas people with poor credit often struggle to even get loans let alone negotiate for good terms.

So rather than using a poor credit score to get a bad loan deal, you can wait and build your credit till the score improves before applying for a loan. On the other hand, if you already obtained a bad loan with poor credit, you can also build your credit score, then use the new and improved score to negotiate a new loan to refinance your mortgage.

8. Go for Shorter-term Loans

It’s no secret that the interest you pay increases as your loan term increases. So a good rule of thumb is to apply for loans with shorter terms where possible. Doing this will save you the stress of paying huge sums on interest.

9. Make Larger Down Payments When Possible

Larger down payments mean that you can easily negotiate for better loan terms while also cutting down the number of years it would take you to repay the loan and the total interest paid. If you can, save up enough money before making a house deposit. However, if that’s not possible, try to pay at least 20% of the house equity to save money on PMI fees.

10. Maintain Consistency

Consistency is key when making payments for your mortgage. Regardless of how large the loan amount might be, you can chip away at it little by little by making small, consistent payments. And if possible, try increasing your payments to a biweekly rate.

This involves making your loan payments every two weeks instead of a monthly payment. This way, you make 13 monthly payments in a year – based on 26 bi-weekly payments rather than 12 monthly payments. Doing this adds up to one extra monthly payment every year, which can significantly cut down your interest and repayment time along the line.

The Easiest Way to Save Money on Your Next Mortgage

The easiest way to save money on your mortgage is by getting loans with favorable terms. And while this might seem difficult in practice, it can be easily actualized by working with a mortgage expert.

That’s where they come in; Blake Mortgage is the best mortgage lender in Arizona. They have been in the mortgage business for over 15 years, providing tailored loan packages for various real estate projects, including construction, commercial, FHA, conventional, home, and Jumbo loans.

They have helped many homeowners and investors bring their real estate dreams to life in our journey to becoming the best mortgage lenders in AZ. They are confident that they can do the same for you. So why go through the hurdles of bad and unfavorable loan terms when you can work with the best mortgage lender in AZ.

Check out their custom loan solutions and contact them if you need help or have any additional questions.

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