When most people look for a mortgage, their main goal is to find one with the lowest monthly payment. But it's better to look at how much it will cost you in interest payments and fees over the long term. You can save a lot of money over time if you look at these costs.
Even if you already have a mortgage, there are still a number of things you can do to lower the total amount of interest you'll pay. Most of these help you pay off your loan faster, which lowers your long-term interest costs.
Here are some ways to lower the cost of your mortgage over time:
Compare prices
When shopping for a mortgage, it's always a good idea to get quotes from more than one lender. Offers can be very different. You shouldn't take a mortgage with a high interest rate without looking for a better deal. This is especially true if your credit isn't as good as it could be.
Think about costs
The fees or points that lenders add to the deal are one thing that makes your mortgage cost more. Pay close attention to these, and don't be afraid to question fees that seem too high. The annual percentage rate (APR), which includes both the interest rate and any fees, is a good way to compare offers.
Cut the time down
If you plan to live in the house for a long time, a shorter mortgage term will save you a lot of money on interest. This will make your monthly payment more, but it will save you a lot of money over the life of the loan. It could also help you get a lower rate on the loan. For example, if you choose a 15-year term at 5.75 percent instead of a 30-year term at 6 percent for a $100,000 mortgage, you can save $66,364 over the life of the loan.
Pay bi-weekly
Instead of paying your mortgage every month, you might want to pay it every two weeks. There isn't much of a difference, but this can help you pay less interest because your principal goes down more steadily. And since there are 26 two-week periods in a year, you make an extra monthly payment each year, which makes the principal go down even more.
Remove the PMI
If your down payment is less than 20% of the price of the house, you may have to get private mortgage insurance (PMI). But you can ask your lender to cancel the insurance once the amount you owe on your mortgage is less than 80% of the value of your home. This could happen if you pay off some of the principal or if the value of your home goes up quickly. You might have to get the house revalued, but the money you'll save should make it worth it.
Visit http://www.lendingtree.com/cec/yourhome/yourmortgage/how-to-save-money-on-your-mortgage.asp for more ways to save money on your mortgage.
