Ways to Reduce Mortgage Costs

For most people the largest monthly bill they need to pay is their mortgage payment. There are several ways to reduce mortgage costs which will reduce the total amount which you repay to the lender over the term of the mortgage. There is no point in throwing tens of thousands of dollars away in unnecessary interest payments when it is possible to build up equity much faster whilst paying less.

If you are currently paying a mortgage at a higher than necessary interest rate then the easiest solution is to simply request that your mortgage lender reduces your interest rate. Those who always pay by automated debit in a timely fashion will be considered valuable customers, and the lender may be willing to reduce the interest rate without going through the tedium and expense of refinancing. It costs nothing to ask.

If your mortgage lender is not amenable to this suggestion then consider refinancing with another lender, and locking into the most preferential interest rate you can find. Apply careful research to be certain of locating the best available rate. If you can, save up to cover the refinancing costs so that they aren’t added to your mortgage and accrue further interest. The savings made can represent tens of thousands over the term of the mortgage.

As the monthly payments will be immediately reduced then take the opportunity to reduce the term of your mortgage to save even more on the total interest repaid. The shorter the term of the mortgage the less it will cost you. Just be careful not to sign up for a mortgage which imposes any penalty clauses.

If you haven’t taken on a mortgage yet but are considering it then the most effective way to reduce your mortgage costs is to apply with an excellent credit score which should secure you a preferential interest rate. Ensure that the down payment is a minimum of 20% to avoid paying private mortgage insurance on behalf of the lender. A larger down payment will also help you to secure a much lower interest rate.

Don’t add the closing costs to the mortgage itself but pay for them separately so they don’t accrue interest. Never underestimate the savings you can make by asking for a discount or reduction. You are far more likely to secure this by offering a cash payment rather than by borrowing to cover the additional costs. Again, consider that the shorter the term of your mortgage the more overall savings you will make, as well as reaping the benefits of being mortgage free sooner.

If you are seeking to reduce your mortgage costs due to financial difficulties you should ask your lender for a loan modification. However it is worth noting that the majority of home loans which received modification due to financial hardship still resulted in the mortgage reaching a default stage.

Finally the simplest way to reduce your mortgage costs is to buy an affordable property, rather than one which stretches your budget to the limit. It is far wiser to buy a property which doesn’t break the bank and trade up when equity is established, than to buy more house than you can actually afford.