Are you worried with the cost of your mortgage loan and thinking how to reduce it? Here are some ways to reduce your mortgage loan cost significantly.
- Shop for a comparatively lower interest mortgage loan – The Federal Board says that shopping for loans and comparing the terms and conditions might help save thousands of dollars on home loans. However, people often overlook this factor as they are too comfortable in working with their existing bank since they have been banking with them for many years. However, by doing so, people are often ignorant whether or not some other bank is offering mortgage loan at lower rate and other terms and conditions, which are more suitable for them.
- Consider refinancing your existing loan with a new one – Refinancing is one of the best ways to reduce your mortgage cost, especially if you’ve been paying more on interest every month than the current market rate. It can also happen that you’ve been paying more on your home loan since your credit score were not so good at the time you took out your mortgage but it has increased over the years. Through refinancing your home loan, you actually pay back your existing mortgage with a new one, on which you need to continue making your monthly loan payments. You can also refinance your adjustable rate loan with a fixed rate loan in order to lock in the interest rate for the rest of the loan term and thereby, reducing the monthly mortgage cost.
- Try to increase your credit score by some points – You must be knowing that lenders check your credit report and score before offering you a loan, in order to assess your creditworthiness. Therefore, if you’re not able to manage your finances properly, then there will be a reduction in your score. So, try to increase your score before applying for a mortgage loan or refinancing it. Now, you may thinking how to do that. It’s simple. First of all, pull your credit reports and fix errors if any. Next, ask for your credit scores from each of the 3 major credit bureaus and try to increase it if required. To do so, never make any late payments on your loans and do not use your credit limit entirely; in addition to this, always make your entire credit card payment at every billing cycle.
- Evaluate the current value of your home – It is of course a thing to worry when the value of your property goes down. However, there’s a good aspect of it too. The property tax also decreases with the reduction in the property value. Therefore, always assess the current value of your home before paying the property tax. And, if you think that the value has decreased and it hasn’t been properly accounted for in your tax assessment, you can always petition your assessor and fight for the assessment for the real value of your house.
Every month, do you have some extra money in your hand after meeting your daily necessities? If yes, then you can consider making extra payments towards your mortgage loan. What you can do is, while planning a budget, keep aside this amount as your home loan payment and put it towards reducing your mortgage loan. Make sure you send this payment along with your designated monthly payment before the scheduled date. This will help cut your total interest cost by about thousands of dollars. You can also save a certain amount every month and make an extra payment annually. These extra payments are automatically applied towards reducing the principal loan amount and you’ll not have to pay interest on that amount for the rest of your loan term. So, try to save a certain amount every month so that you can save on your mortgage payments significantly.