Buying a home is the single largest purchase most people make in their lifetime. Thanks to mortgages and other agencies, more people can own home. Refinancing can become daunting and even stressful. Luckily, some strategies will help you save thousands in interest and get into your home sooner. In this article, we point out mortgage strategies that will save you money in the long run.
Consider the Type of Mortgage
It is advisable to get a mortgage that best suits your needs. Larger mortgages and interest rates give you a lower monthly payment, but the time it takes before your mortgage is paid off increases. On the other hand, smaller mortgages and higher interest rates result in shorter payoffs. Still, they also mean that more money goes toward paying down the debt instead of accumulating interests.
Understand the Terms of Your Loan
Ensure you know your loan terms, including what happens if you don’t make payments or refinance. An often overlooked detail of a loan is the interest rate, which can become very high if you do not make payments or refinance. Always keep this in mind when dealing with any loan.
Refinance Your Mortgage to a Lower Interest Rate
A home is an excellent investment. However, with the economy still struggling, many homeowners are unable to refinance their home loans. It may be beneficial for you to refinance your loan if your interest rate is high or if you have other non-home-related expenses that prevent you from paying off your mortgage quickly. Refinancing your home with a lower interest rate will reduce the total amount paid in interest over time.
Pay Off Early with Bi-Weekly Payments
Paying bi-weekly minimizes your principal balance and the interest you pay. For example, if your home is $250k and you have a 30-year mortgage with an interest rate of 5%, bi-weekly payments will save you almost $5500 in total paid on principal and interest. You will clear your mortgage faster and pay slightly less interest. Bi-weekly payments are a great way to repay your home loan quickly and save on interest too.
As you can see from the above example, it is worthwhile to take up this strategy of paying their home loan off early. There isn’t any fee attached to making bi-weekly home loans payment, which makes it even more attractive.
Get a Reverse Mortgage for Seniors
Do you know seniors over 62 years old can apply for a reverse mortgage? A reverse mortgage is a home loan option that lets you borrow funds from the bank and pay it back with interest when you no longer use your home as a primary residence. The amount can be up to 50% of your home’s worth, depending on fair market value.
Types of property that are legible for government-backed reverse mortgages are condos, manufactured houses created post-June 1976, multi-unit properties with at most four units, and single-family homes.
With these tips, you will save a lot of money once you complete refinancing. Having the right financial strategies is key to financial freedom. I hope the information above is insightful.