Housing costs can be expensive-everything from property taxes to mortgages to home maintenance can put a big dent in your wallet. These large housing expenses can make it very difficult for people to pay their other expenses, such as living costs, saving for retirement, and paying off debt. An effective way to reduce your housing costs is to shrink your mortgage. Now that the introduction is out of the way, let’s get into the top 5 mortgage hacks that will save you money.
Refinance your mortgage to get a Shorter-Term Mortgage
You can change your mortgage by refinancing to a shorter-term mortgage loan. A lot of homeowners have a 30-year mortgage, but here’s the trick. You can decrease your interest rate by a lot and pay off your mortgage faster by refinancing to a 15-year mortgage. Although you may have to deal with closing costs for the refinancing process and have to deal with a higher monthly payment, switching to a 15-year mortgage term will help you with paying off your mortgage plan faster.
Use Refinancing to get a Lower Interest Rate
Alternatively, you could refinance your mortgage in a different way to save money. Instead of refinancing to decrease your mortgage term, you could refinance to decrease the interest rate on your mortgage. The benefit of having a reduced interest rate is the lower monthly payments on your mortgage. Unfortunately, refinancing may cost you anywhere from 3% to 6% on closing costs. If you are going to do any refinancing plan, make sure the benefits from reducing your interest rate are big enough to outweigh the closing costs.
Decrease or get rid of Mortgage Insurance
When you get a mortgage, some lenders require the homebuyers they are working with to obtain private mortgage insurance (PMI). Lenders typically require this if the homebuyer only puts down 20% on their home or if they refinance it with less than 20% equity. The costs for PMI are usually around 0.5% to 1% of the complete loan amount. Thankfully, you can decrease your PMI costs or get rid of them completely if you meet set conditions. Two methods you can use to do this are paying down the balance on your mortgage to 80% of the home’s original appraisal value, or by getting a new home appraisal.
This article was written by Ian, an intern at Irish Mortgage Brokers and Yes.ie from the USA.