The number one expense for most homeowners in the US comes in the form of a monthly mortgage payment. While cutting out spending in other areas can have an impact on your budget, attacking the biggest monthly expense can make a huge difference in your cash flow going forward. If saving thousands of dollars over the life of your mortgage loan interests you, check out these 4 sneaky mortgage hacks and implement them as soon as possible.
Mortgage Hacks – Pay Your Mortgage Two Times a Month
Most homeowners get paid twice a month right? So instead of paying your mortgage payment once a month like most people do, why not split your mortgage payment in half and pay it twice a month. The benefit to paying your mortgage twice a month versus once is that it will save on total interest costs paid and cut years from the life of the loan because you end up making 26 half payments, or the equivalent of 13 monthly payments a year.
In addition, you also end up making half the monthly payments 2 weeks early so you save the interest on that half as well. This can only be implemented if your current mortgage does not include a prepayment clause. So double-check that before setting up a bi-weekly mortgage payment plan. In the case that there is a prepayment clause in your current mortgage you may still be able to implement this mortgage hack by refinancing your mortgage.
Mortgage Hacks – Refinance Your Mortgage When Interest Rates Fall
A general “rule of thumb” is that it generally makes sense to refinance your mortgage whenever you can reduce your interest rate by 1%. Do note, mortgage refinancing involves closing costs which either have to be paid out of pocket, or rolled into the new mortgage loan. Fortunately, refinance closing costs are typically less than the original home purchase closing costs but they still might add up to a few thousand dollars. While this is a concern, many banks offer discounts and/or rebates for refinancers.
Mortgage rates are currently sitting near historically low levels so if you have had your mortgage for a while it might make sense to look into a mortgage refinancing. When doing so we recommend shopping around for the lowest mortgage refinance rates that fit your specific financial situation.
Editor’s Note: Here’s a quick mortgage rate comparison tool to help you find the best mortgage refinance rates for your particular area.
Mortgage Hacks – Bye Bye PMI
Private mortgage insurance (PMI) was never intended to be a fixed cost payable throughout the life of a mortgage loan. Federal law says PMI may be dropped if your mortgage payments are up to date and the equity in your home is equal to at least 20 percent of the original purchase price.
One mortgage hack to get to that magical 20% figure is to pay extra money toward the principal in the early portion of the mortgage loan so you can more quickly reach the point where PMI is no longer required. This mortgage hack can save you hundreds a month. The trick here is you have to request that it be dropped when you reach the 20% equity point, banks will not do it automatically.
Mortgage Hacks – Request A New Home Valuation
If you suspect that your home has dropped in value, you can request a new property tax assessment from the city or county to reflect this change. If an adjustment is granted, it could save you hundreds or even thousands of dollars per year on taxes.
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