5 Tips on How to Save Money on Your Mortgage
11 March, 2010 / by Bryan Jaskolka
Heeding Simple Advice Can Save Money
The other day I came across this little article with some seemingly simple advice for those looking for a mortgage. I thought that it might be a good idea to review some basic ways of saving money over the course of a mortgage.
Here are a couple of tips that first time homebuyers should know before deciding on a mortgage and seasoned buyers can use as a review:
- If possible, make a larger down payment. Doubling your down payment from five to 10 per cent can cut down on the amount of interest you’ll pay over the life of the mortgage.
- Take a shorter amortization period. Choosing less than the standard 25- or 35-year period means that you’ll pay more per month up front, but over the life of the loan you’ll pay considerably less interest.
- Most financial institutions let mortgage holders make lump-sum payments each year. Take advantage of this option and shave a little more principal off your mortgage.
- Instead of making payments on a monthly basis, chose a weekly or bi-weekly plan. You’ll pay slightly more per month, but you’ll pay down your principal more quickly.
- Don’t be seduced by low interest rates into buying a bigger or fancier home than you need. Buy a house that is in your budget, not the house that fits your lifestyle. Being house poor is never fun.
While some of these tips might seem obvious, it’s easy to forget just how much interest is paid to the lender over a 25- or 35-year amortization period. At the end of the day, it basically comes down to: pay more now, save more in the long run. This is can be difficult to put into practice, particularly given current real estate prices. Remember, when buying a home to be sensible, but have fun!