5 More Unconventional Ways to Save on Your Mortgage

4 Feb

The average mortgage payments vary by state. They are lower in places where housing prices are also more affordable. The government also doesn’t release any official report.

However, industry data revealed that most homeowners today pay a little over a thousand each month. Some might find that comfortable to pay. But regardless of one’s income, everyone can benefit from saving strategies, some of which many don’t often hear.

1. Pay Biweekly

People pay their mortgages monthly. To reduce how much they pay for interest, they try to pay theirs early or before the due date.

Many experts feel this is not the best strategy since lending companies do not offer incentives for doing that. They also don’t create a dent in either the principal or interest since borrowers are still paying the exact amount.

Instead, they can consider a biweekly payment. It means that they divide their monthly dues in two or pay every two weeks. The strategy helps them pay less on the mortgage since they pay an equivalent of 13 months instead of the usual 12.

2. Use HELOC

Reliable mortgage companies can offer many programs, including HELOC. This one stands for a home equity line of credit, which means that homeowners can borrow against the equity they have in their home. It is a loan with a low interest rate and flexible repayment terms.

Some people get HELOC to fund big projects, like home improvements and even education. But they can also use it to pay off their mortgage sooner, especially if they have already built sizable equity on their property. It happens when:

  • Their payments are already enough to cover the interest and principal.
  • The house has increased in value, so it is worth more than what they owe on their mortgage.

3. Negotiate the Loan

Homeowners don’t need to accept the first mortgage offer. In fact, they can negotiate the terms. They can do so before they apply for a home loan, before they refinance the property, or before the mortgage’s maturity date.

Negotiating home loans is essential when:

  • The borrower’s credit score is significantly higher than when they first applied.
  • The borrower’s financial position has changed. For example, they acquired a job that pays a much higher salary, allowing them to pay more. On the other hand, they might have suffered a setback, making paying the mortgage at the current rate difficult. Some lenders will accommodate such requests for negotiation than go through the lengthy foreclosures process.

4. Bring the Mortgage Somewhere Else

Contrary to popular belief, consumer protection laws allow borrowers to switch providers or lenders at any time during the loan. But the process can be complicated or difficult depending on what stage it is.

It might be easier to change a mortgage lender during the underwriting phase than when the company has already released the funds. Usually, when this happens, one of the best options is to apply for refinancing in another provider.

Nevertheless, borrowers should consider switching lenders if:

  • The borrower’s credit score has improved significantly.
  • They want to pay less for interest or other charges. The other lender might offer lower rates compared to their current provider.
  • The new lender offers better terms, such as a longer repayment period.
  • The new lender offers more flexible or lenient underwriting guidelines.
  • The other lender provides more superior customer service.

5. Get Rid of PMI ASAP

Usually, lenders will ask for a 20 percent down payment on the property for several reasons. It reduces the risk of default and enables them to maximize their profit from interest rates.

Those who pay less than this percentage can still apply for a mortgage, but they may need to spend more on private mortgage insurance (PMI). PMI protects the lender against the risk of foreclosure.

But it is also an additional expense for homeowners, especially since it can go on for years. The good news is that they can ask the lender to stop PMI when:

  • The borrower has at least 20 percent equity in the property.
  • There is more than 20 percent equity compared to what’s owed on the mortgage.
  • The borrower’s credit score has improved significantly.
  • The borrower can prove that their financial situation is stable so that they can make future payments without any problem.

A mortgage accounts for a significant percentage of household spending. While it is necessary for many homeowners, it can also be a burden. Knowing more options to save cash on it can be a big help.

Homeowners can pursue many ways to save money on their mortgages. They can negotiate the terms, use HELOC, switch providers, or get rid of private mortgage insurance (PMI).