Having a house to call their own is a dream for many people.
When you own your home, you not only enjoy the security of having a roof over your head, but it also represents your independence and ability to invest in your future.
But if you’re having difficulty finding a home you can afford, even on a mortgage, you may need to rethink your strategy.
The next best thing you can do is to take advantage of having the right knowledge to guide you in this type of venture. The good news is, you’re off to a great start as this article contains five tips on how you can save on a mortgage.
1. Look around for a better mortgage.
The very essence of buying a home is like shopping for other items; you need to look around first for you to find the best deal. This is vital, especially if you’re looking to save money in a real estate purchase.
Most newbies go with the traditional 30-year mortgage, thinking that they get to pay less. However, you can spare a lot more cash in the long run if you choose a different type of mortgage.
You see, shorter mortgage terms may have bigger monthly premiums, but they make up for that by having lower accumulated interest. This is because you’ll be paying interest for a lesser number of months compared to a full 30-year tenure.
2. Take advantage of mortgage calculators.
If you plan to save on a house purchase, the most important thing you need to have is knowledge about all the factors that affect a property’s total cost. This is where a mortgage calculator can help.
This tool is beneficial for people trying to figure out the types of properties they can afford. Basically, it makes complex amortisation calculations simple, providing instant information based on what you need.
This includes:
- Monthly principal: The amount you borrow that needs to be paid back.
- Interest payments: How much the bank or lending institution will add to what you owe on top of the principal for the entire duration of the mortgage.
Although these are only two of several numbers you need to know, they are the most important ones you need in order to decide whether you can afford the property you’re planning to buy.
3. Inquire about prepayment perks.
This type of arrangement allows borrowers to pay off their mortgage faster by prepaying a percentage of the principal within a specific amortisation period without any penalties. And early repayment is tantamount to fewer months of paying interest fees.
Take note that some lenders might bait you into signing up for their “best rate” in exchange for prepayment disallowance during the set term. Your hands will be tied if this happens, so be sure to consider these details before you decide.
4. Learn about mortgage recasting.
One thing that makes mortgage payments a heavy burden for many people is the monthly repayment over a certain length of time. If you’re in the same boat, you should consider learning more about mortgage recasting.
According to Forbes, this process entails reducing your mortgage balance by paying a lump sum. After that, you’ll then make smaller monthly payments until the entire loan has been paid off.
Take note that this isn’t the same thing as mortgage refinancing, as it doesn’t change the term of your loan or the interest rate set. Instead, it will reduce your monthly payments and help you save on interest charges while repaying your entire loan.
5. Make bigger down payments.
Another way you can save on your monthly amortisation is by paying bigger down payments.
This may not be easy to achieve for most people who take up mortgage loans. Still, the fact remains that paying a larger amount initially will reduce the mortgage rate significantly.
So, if you do have extra money you do not currently have a need for, you should consider using it to save more on your real property purchase. Think of it as an investment with a return that comes in the form of mortgage savings.
Around 20 percent of the total principal amount should be enough to get you this benefit.
Own Your Dream Home
Having a home is a significant milestone, but that doesn’t mean you should rush into the process.
From finding the right mortgage to saving up for a bigger down payment, there are plenty of ways you can save on the amortisation of your real property. The key is to be patient and gather all the necessary information to guide you in making the right choices.