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Save Money on Your Mortgage

May 27, 2008  |  Difficulty: Easy

Path to mortage
To save money on your mortgage, you will need to avoid a lengthy contract. Get the lowest interest rate you can and sign for a mortgage amortization that lasts for a shorter amount of time. These two steps will save you a lot of money.

But you have to take the monthly payments into consideration. The shorter amount of time you have to pay back the loan (traditionally called the amortization), the higher your monthly payment will be. It’s true, you will save money over time, because you will be cutting interest fees, but you first have to be in the position to pay the monthly amount in the here and now.

There is a safer option. If you place your mortgage amortization between 25-30 years, you can actually save money by choosing to pay increased monthly payments. When you increase your payments, you are allowing yourself to pay back the mortgage within a shorter period of time. The great thing about this option is that you are able to transfer the increased payment amount back down to the initial reasonable amount, if this is needed. Most lenders will allow you to choose this option with no extra penalty or cost to you.

Imagine that you just received a salary increase of 6%. If you have a good mortgage you should be able to increase your monthly payments by 6%. This may not seem much now, but this amount of money will accumulate over the years. The little amount of extra money that you pay each month is actually helping you to decrease the total of the loan.

A family emergency arises, and you need cash. Now you want that extra 6% that you’ve been paying each month. This should be ok. All you need to do is decrease your payments down to the initial monthly amount. Just keep in mind that some lenders have certain rules about how many times you can re-adjust your payment plan.

If you don’t feel the need to increase your monthly mortgage payments, there is another option. Say you get that yearly bonus, or you have extra money in the bank account that you have been saving over time. You can use this money to pay your mortgage loan. Even if this amount isn’t so impressive, it is a collection of money that decreases the total amount that you need to pay back. Even those small lump sums can help you to get rid of your mortgage faster. And everyone wants that!

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