Mortgage Hacks: How to Save Money on Your Home Loan

You just signed your closing documents and got the keys to your new home, now what? Assuming that you purchased that home with a loan, you are now committed to paying a mortgage. A mortgage may be better than paying rent, but it’s still money out of your pocket, so why not try to secure some savings?  In this blog post we are sharing 5 tips for saving on your mortgage and paying as little interest as possible!

1. Make Bi-Weekly Payments Instead of Monthly Payments

Most people are used to paying their mortgage monthly, similar to a rent payment. This means you make 12 full payments a year which is equivalent to 24 half payments. If you make bi-weekly half payments in a 52 week year, you will actually end up making 26 half payments instead of 24. This will set you on track to pay off your mortgage in 25.6 years instead of 30. By paying your mortgage off early you are able to save interest on the life of the loan!

2. Consider a 15 Year Mortgage Instead of the Traditional 30 Year Mortgage

If you already have an active mortgage, then this tip would mean that you are considering refinancing based on your specific circumstances. However, if you haven’t quite closed yet and can afford the payment, then make sure to consider doing a 15 year instead of a 30 year mortgage. A 30 year $300,000 mortgage with a 6.5% fixed rate accrues $382,786 in interest over the course of the loan, but a 15 year mortgage at the same price and rate accrues $170,438 in interest! Your month-to-month payment will be higher, but if you know you can afford it, you will pay a considerable amount less in interest over the course of the loan.

3. Every 2-3 Years Make Sure You Are Reviewing Your Mortgage

Make sure you consider refinancing every 2-3 years so that you don’t miss the right time to get a better interest rate. However, remember that anytime you refinance you will encounter servicing fees for doing so. Make sure you check what your lender’s fees are and go one step further by asking if the often new, higher fees can be lowered. Most people don’t think to ask about discounts that lenders may offer, be one of the few who do!

4. Make One Extra Mortgage Payment Per Year Direct to Principal.

Making one extra mortgage payment per year direct to principal will allow you to pay off your 30 year mortgage in just 24 years, saving you years of interest payments! This is perhaps one of the simplest ways to pay off your mortgage faster.

5. Make One Extra Mortgage Payment Per Quarter Direct to Principal

If you make one extra mortgage payment per quarter direct to principal you will be able to pay off your 30 year mortgage in just 19 years. Completing that mortgage 11 years faster will help you pay a significant amount less in interest overall. 

Will you take advantage of one of these strategies to pay less interest during the lifespan of your home loan? We hope these are helpful as you consider ways that you and your family can save money on your home purchase. Have any questions about the math, or how exactly to carry out these strategies? We are always happy to walk you through your options. You can reach us with the information below. You’ll also find a summary graphic we’ve made for you so you can quickly come back to these mortgage hacks at a later date!