Few things cost more than a home. The median price of a house in the U.S. is now more than $215,000, and housing prices are still going up. The interest on the mortgage adds to the cost. Most people will pay about twice as much for their house in interest alone over the life of their loan.
Including interest, the average American house now costs more than $500,000, which is a lot of money. But while everyone wants to own a home, few people are excited about the idea of paying their lender almost $400,000 in interest. And yet, many people do it, even though they may not know there are ways to lower the cost of buying a house.
Here are some things you can do that might help you buy a home for less:
Eliminate your private mortgage insurance (PMI). If your down payment is less than 20%, your lender will require you to pay private mortgage insurance every month. This keeps the lender from losing money if you don't pay, but it doesn't help you at all. If the value of your home goes up or you pay off some of your mortgage, your equity may be worth more than 20% of the value of your home. Then you can ask your lender to get rid of the PMI. The lender won't do it on their own; you have to ask. You will also have to show proof of the home's value through a formal appraisal. If your lender drops your PMI, all you have to do is add the amount you were paying to your monthly mortgage payment. The extra money will help you save money on interest and pay off your loan faster.
You can add to your payment. Each month, you can pay more than the amount shown. Any extra money you pay should go toward the principal of your loan. This will help you pay off your loan faster. Even saving $10 or $20 a month could save a few thousand dollars over the life of the mortgage.
Refinance your loan: If interest rates drop to within one or two points of your loan's interest rate, it might be worth it to refinance. Most of the time, the costs of refinancing can be made up for in a few years through lower payments. You could save tens of thousands of dollars over the life of your mortgage, depending on the size of your loan and the interest rate.
These are just a few ways you can cut down on the cost of buying a home. Even though you can't do much about the price of the house, there are many things you can do to lower the amount of interest you pay over time. Every penny is important.
