How to Save Money on your Home Loan

Buying a home might be one of the most expensive purchases most Americans will ever make. Follow these tips to making the wisest choice possible.

Difficulty: Easy


Save Money Home
Be sure you understand the type of mortgages available. Fixed Rate mortgage (probably the safest bet). Adjustable rate mortgage (if interest rates go down, payment goes down--BUT if interest rates go up---payment goes up)Balloon mortgage--low payment for 1-7 years--but then lump sump payment has to be made or you lose home (not a cool option). Interest only mortgage--low payment for 1-5 years BUT then lump sum payment (these last two options are why so many people have lost their homes)

Save Money Home
Research and negotiate.Because mortgage lenders must compete for your business, you might be able to reduce or even cut some of the fees, closing costs or the interest rate itself. Gather competitive rates from lenders in your area, then ask a specific lender to match a feature or two. Also make sure to clean up your credit report first-the better your history, the stronger your negotiating position.
Avoid Private Mortgage Insurance (PMI)-You can generally do so if you provide a 20 percent down payment. (If you're already paying PMI, drop it the moment you hit 20 percent in home equity.) Believe me I know about this one--I am still paying PMI after 4 years!
Make biweekly payments- BUT do not pay ANYONE for the privilege. Consider paying half of your monthly mortgage payment every two weeks. Because you'll have made 26 of these half-payments by the end of the year, you'll actually have the equivalent of a 13th monthly payment. When you send the extra months payment in, request it to be applied to the principal only (not to the interest). With this method, you can pay down a 30-year loan in just 24 years and save tens of thousands of dollars of interest! Add a little more money every two weeks, and save even more! The trick is to stick to this schedule.

Tips & Warnings:-

If you already own your own home, look into refinancing. Sometimes this can save you a lot of money. Go from a 30 yr to a 15 year mortgage and save a lot of interest!