Tag Archive for Mortgage

3 Ways to Pay Your Mortgage Off Faster

3 Ways to Pay Your Mortgage Off Faster

3 Ways to Pay Your Mortgage Off FasterFor most people, a home mortgage is the largest debt they have ? and the largest debt they will ever take on. If you own a home, you would certainly love to pay down your mortgage as quickly as possible.

But is there really anything you can do to get rid of this debt faster? While it might seem like a huge mountain to climb, you can take some steps to speed up the process of paying off your mortgage.

Let?s take a look at three options that you may wish to consider.

Find Room for Additional Payments

If you are able to make additional payments on your mortgage during the course of a month, those payments are going to be applied directly to the principal of the loan. Obviously, you will need to have room in your budget for these extra payments, but if you do, they can dramatically change the long-term outlook of your repayment schedule.

These additional payments are powerful because they are not reduced by interest expenses.

For example, let?s say you have a monthly mortgage payment of $1,000, with $500 applied to the principal and $500 applied to interest. If you can add another $200 per month to that payment, you will be able to reduce the size of the debt by an extra $2,400 in just one year.

Your numbers will vary, of course. But, it?s easy to see how these payments can be a powerful way to build equity.

Take Out a Smaller Mortgage

Many people live in a larger house than they really need to accommodate their lifestyle. If you have a big family, you may actually need that big house. But, the typical married couple with two kids probably doesn?t need to live in a mini-mansion.

By purchasing a smaller house, or buying in a more affordable area, you can take out a smaller mortgage and likely pay that mortgage off faster.

In fact, buying a less expensive home may allow you to take out a 15-year loan, as opposed to the 30-year mortgage that is so common. You?ll wind up paying less interest on a 15-year mortgage, making your house even more affordable in the long run.

Pick Up Extra Work

For those who are particularly motivated to pay off their mortgage early, picking up a part-time job may be a viable option. For instance, you may decide that you are going to work a few hours on the weekend. Or, you may have the ability to do some extra work from home in the evenings.

Assuming the rest of your budget is already in good shape based on your regular income, you may decide to direct all of the money from your other job toward making extra mortgage payments. Going in this direction is going to require discipline and hard work. But, it will feel good when you see that mortgage balance dropping steadily.

Paying off your mortgage early may seem far-fetched at first. But, taking these small actions regularly can help you pay it off earlier than you think.

 

Are you trying to pay your mortgage off early? What are you doing to make extra payments?

 

Photo courtesy of: DebbieHalcomb

5 Ways to Save for a Down Payment

down payment

wallet-669458_640There are many occasions when you may need to make a down payment to secure a loan. For instance, when you are buying a house, you will often need between 10% – 20% down in order to qualify for the mortgage. When buying a car the requirements for a down payment are less, but it is still important to have some cash available for the transaction.

No matter what kind of purchase you are going to be making, you will need to have a plan for how you are going to save up the down payment necessary to close the deal. Here?are five ideas for doing just that.

Give Up a Guilty Pleasure

Do you stop for an expensive coffee on the way to work each morning? Consider giving up that habit as a small step toward saving up for a down payment. While this method isn?t going to make much of a dent in terms of saving for a home purchase, it might free up the cash you need to eventually buy a car.

After all, stopping for a $5 coffee five days per week is more than $100 that could be saved within a month. Don’t just sit on the savings either but put it in an online savings account, such as Discover Bank, to try and grow the savings.

Make It a Priority

Quite simply, you have to prioritize your down payment if you want to actually be able to accrue the cash you need to make it happen. If you put more value on things like going out to dinner or going to the movies, you will spend your money there instead. Keep the down payment savings as a main focus, and you can make progress quicker than you might expect.

Sell Off Junk

It might not seem possible to raise money for a down payment just by selling junk from around the house, but you may be surprised to find how much value there is in the clutter?that you never use.

This method is great because you can clean up your home and make space while also raising money at the same time. Again, this isn?t going to help much toward buying a house, but smaller down payments can be tackled using this approach.

Take on an Extra Job

With a specific goal in mind, such as saving for a down payment, you may want to take on a second job in order to make extra money. Set an amount of money that you wish to save and then figure out how long you will need to work your second job in order to raise that money successfully.

Improve Your Credit

This is something of an ?outside the box? tip, but it can work. By improving your credit, you should qualify for better terms on a loan, and you might not need as much of a down payment in order to close the deal. For instance, if you can improve your debt-to-income ratio, lenders will look upon you more favorably, and the terms of your loan will become easier to negotiate. Suddenly, you may not need as much of a down payment, and you may be able to make your purchase sooner as a result.

 

Are you saving up for a down payment? What are you doing to save money for a down payment?

 

Photo courtesy of: Brett_Hondow

How to Get a Better Mortgage Rate

Mortgage Rate

Mortgage RateHome ownership is something that most people aspire to at a least at some point in their lives, and most will have to obtain some sort of financing for this major purchase. Getting the best interest rate possible on a mortgage is very important and can save you from wasting more money than necessary on interest. If you?re looking to buy a new home consider some of the following ways you can get a better mortgage rate in order to save big money in the long run.

Shop Around

Before you being the home buying process with the hometown bank you?ve dealt with forever, look around at the mortgage rates offered by all the banks in your area and even some online-only mortgage lenders. It?s possible that the bank you?ve worked with forever, while familiar, is not the best choice for a long-term loan like your mortgage. Lots of times local banks are not able to secure the lowest rates because of their small size and their (likely) higher percentage of overhead costs.

Check Your Credit

Knowing what your credit score is and how it affects your mortgage interest rate is important before you get too far into the home buying process. Generally speaking, it?s possible to obtain a mortgage loan with a credit score as low as 620, but the best rates are given to those with scores in the mid-700s or better.

When we were obtaining financing for the purchase of our home, our lender explained that we should avoid having my credit score pulled during the months between our first discussion and the final closing of my mortgage loan. He explained that lots of people buying a house also try to obtain auto financing around the same time, which can make a big dent in your credit score. So to obtain the best credit score, and thus the best interest rate possible, you should avoid opening any new credit lines or financing any other purchases until after your home loan has closed.

Refinance for a Lower Rate

If you?ve already locked yourself into a mortgage with a high interest rate you?re stuck, right? Wrong! Refinancing may be an option to help you get a better interest rate on the remaining life of your mortgage. There are lots of reasons people refinance ? to shorten the life of the loan, to lengthen the life of the loan (lowering the overall monthly payment), or to get a better interest rate. Unfortunately, refinancing can be a complicated process to qualify for so it?s best to check with your lender if you are considering this route to savings.

While none of these tips will likely save you a lot percentage-wise on your mortgage interest rate, when it comes down to it even shaving off a fraction of a percent can save you thousands of dollars of interest over the life of your mortgage. Saving money on interest charges can be compounded if you put those savings toward extra principle payments to shorten your loan?s amortization schedule, saving you even more interest. As you can see, following up on these tips is worth it and can result in some serious savings!

 

 

Photo courtesy of: Jim Larrison