After buying a house, it’s time to figure out how to deal with your mortgage and the monthly payment. Most commonly, home buyers will take out a 30-year fixed rate mortgage. This can seem like quite the mountain to climb when you think about making a total of 360 payments over the 30-year term.
The number you saw on your paperwork may have seemed overwhelming, as well. If you took out a $250,000 mortgage with a 5% interest rate, you will end up paying $1,342 per month and more than $233,000 in interest. That’s nearly twice the price of the home you purchased.
However, there are ways to lower that number and save thousands of dollars in interest on your mortgage. Let’s look at a few of the easiest and best ways to save money on your new mortgage.
Use Your Tax Return Every Year
If you get a tax return every spring, pay it towards your mortgage as a lump sum, one-time payment. This will help to reduce the principal balance and the amount of interest you pay on the loan. Even if the tax return is just equal to one extra monthly payment per year, you could save more than $40,000 in interest based on the example from above.
Calculate Payments on a Lower Term
Just because you have a 30-year term on your mortgage doesn’t mean you have to pay like it’s a 30-year term. You can use an online loan calculator to figure out what the payments would be for a 20-year or 15-year term and pay that payment every month.
The extra money you pay will go towards the principal balance and reduce the interest you pay. If you pay like it’s a 15-year mortgage, you can cut your term in half and save tens of thousands of dollars in interest on your mortgage.
Pay a Little Extra Every Month
Even paying just $50 extra per month can make a huge difference over the course of your mortgage. If you paid $50 extra per month, based on the example above, you’d cut two years off your term and save more than $20,000 in interest.
Saving money on your mortgage is a great way to reduce your stress over buying a home. It’s a huge responsibility and anytime you can save thousands of dollars, you should take advantage. Use the methods above and you’ll be able to save thousands of dollars in interest on your mortgage.
I would love to be part of your journey when the time is right for you. If you ever have a real estate question or need, or know someone who does, trust that you can turn to me. I will help you make the right move! Anna Granger 704-650-5707 | firstname.lastname@example.org.