For most people, a mortgage represents their deepest financial commitment, yet many do not take a few moments to pull up a plan in order to slash their mortgage costs. That’s a shame, because thousands of people could significantly reduce their mortgage commitments by following the below advice:
1. Understand What Type Of Mortgage Is Best For You
The type of person you are, the nature of your occupation and your future plans could have a huge impact on what mortgage may be best (and cheapest) for you. For example, if you’re on a very tight budget then a fixed mortgage may well be best, but if you have a bit of cash available then a recent new type of mortgage called an “offset” can save you hundreds a month. With an offset mortgage your savings and mortgage are set against each other – so if you owe $100,000 but have $30,000 in cash you only pay interest on the $70,000. This is usually a tax efficient way of saving on your mortgage.
2. Make Small Payments Regularly To Cut Down The Value Of Your Mortgage
Depending on the type of mortgage you currently have (and assuming you do not get penalised for it), you could make small additional payments onto your mortgage. Even as little as $50 extra toward your mortgage per month could have significant benefits in terms of the final interest amounts your mortgage costs you.
3. Is It Time To Refinance?
The mortgage industry is a highly competitive one. Many lenders are now offering good deals to steal business from their rivals. You may find that by switching your mortgage to a new lender you’re able to save thousands of dollars (or you may receive a cash incentive to switch). You must make sure you’re not breaking any rules of your current mortgage term or you may well offset any potential gains in penalties.
4. Challenge Late Penalties
If you have been late on a payment, some banks can charge a stiff penalty for this. Sometimes, you can write to the bank or call the manager and tell them there was a slight mix up with your bank account and they may be willing to reverse the fee (especially if you drop a hint about going elsewhere).
5. Buy Off Season Mortgages
If you buy at times when the mortgage industry is at it’s cyclical low, you’ll find they often try and have special deals at these times. This can be a great way of getting your mortgage at the lowest possible rate.
6. Fix Your Credit
Make sure your credit is as good as it could be before applying for your mortgage. The higher risk you are, the more you’ll have to face if you have existing arrears.
These are six simple, yet highly effective tips to ensure your mortgage is the lowest it possibly could be.
There are more new home mortgage loan packages today than ever before. The ability to find new and creative ways to finance homes is what makes it possible for more people to own their homes. But before you sign the dotted line, actually before you even apply, its extremely important that you find out what the best mortgage loan type is best for you and your family.
Here is a list and explanation of mortgage types…
Adjustable rate mortgage
As lenders became more concerned about increasing upward trends in home mortgage rates, they searched for a way to lessen the impact on the reserves available. Because the lenders were locked into low interests rates loans and the ability to borrow money themselves was tied to the rising prime rate, they began promoting the adjustable rate mortgage for their home mortgage loans. The ARM floats to various economic indicators so that if the cost of money goes up, so does the amount the borrower will pay on their existing loan. Conversely, if the price of money goes down, the lender has the option of adjusting the loan payment downward.
Fixed Rate Mortgage
As the name suggest, the fixed rate mortgage is a new home mortgage that remains at the original rate during the entire term or mortgage. It is typically a rate that is somewhat higher than the rate available with an adjustable rate mortgage to allow the lender some leeway for climbing interest rates making it impossible to meet future mortgage payment amounts. The lender, on the other hand may have the ability to make further loans compromised if interest rates climb.
Balloon Mortgage
A balloon payment as part of the home mortgage is a larger than normal payment applied to the mortgage, usually at some point in the future in order to reduce the amount of payments early in the mortgage term. A balloon payment may also apply to the payoff amount of the mortgage with the expectation that the borrower will renegotiate the terms of the mortgage loan at that point. This can be a helpful mortgage tool if the desire is to improve credit so as to get a better rate in two years or four years, or whenever the balloon payment is due. It can also be a negative factor if the balloon payment comes due.
Negative equity mortgage
Unless the borrower understand the type of mortgage which they are taking on, he or she can end up with negative equity after paying mortgage payments for two or three years. This occurs when the borrower arranges for a loan payment that is not large enough to completely cover the periodic interest due to the loan. In this type of new home mortgage, the unpaid interest is added to the principal each month and the principal increases. This is known as negative equity in the house. Small monthly payments may seem like a good way to purchase a new home, but if you pay several months or years and owe more at the end of the period than when you started, it can make it even more difficult to refinance the mortgage.
