Buying a New Home? 7 Great Tips to Save Money on Your Mortgage

Buying a New Home? 7 Great Tips to Save Money on Your Mortgage

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Buying a home has to be one of the most joyful, and at the same time, most stressful experiences you can ever have. On the one hand, you are finally saying goodbye to rents and annoying landlords. On the other, this is one of the most expensive purchases you will make in your life and its implications will influence your personal finances in years to come.

The biggest problem, of course, comes in the form of a mortgage that can burden your household budget for up to 30 years. Let us take a look then at some smart strategies you can use to lower the mortgage and make debt repayment considerably easier.
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Buy a smaller house

This mention may sound pretty obvious but it definitely worth discussing in more depth. One of the common mistakes of first-time buyers is that they are looking for the property that will accommodate all their needs and lifestyle changes too far in advance. The gaps that separate big, life-changing events are often measured in decades. The time in-between leaves more than enough room for house expansions, remodeling, and other interventions. But, in that case, the land needs to be open for such extensions.
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Modify the loan

One of the good things about mortgages is that the rates are rarely set in stone. Depending on the program, the mortgage services may allow you to qualify for a reduction of interest rates, extension of the loan period (lower monthly payments), or forgiveness of the part of the principal. Also, you should inquire about the governmental programs meant for first-time home buyers. In some cases, you can get access to arrangements that allow you to repay the debt under more favourable terms.
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Consider buying house and land packages

Once again, the prospects of such arrangements are varying from country to country. But, you can find a lot of examples where such arrangements where such packages are sold under more favourable terms. Let’s take a look at Australia. If you, for instance, decide to buy some of the house and land packages in Austral, the authorities will reward you with a one-off lump sum payment for buying a property. This is regulated by First Home Owner Grant that applies only to new builds.

Refinance the mortgage

Refinancing is a very uncertain ground. But, as long as you know what your ultimate goal is and you are sure you understand all the clauses of the arrangement, you will find the package that suits your current need. Be aware, though, everything comes at a price. Applying for a new 30-year loan at a lower interest rate you will use to refinance debts will still produce a larger total sum than your current arrangement. You will, however, get the benefit of lower monthly rates. So, be sure about your priorities.
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Look for a more favorable insurance

Most of the contemporary mortgage arrangements also include the escrow amount for home insurance. Suffice to say, these packages are not necessarily designed to make life easier for inexperienced first-time home buyers. That is why you should inquire about cheaper insurance policies, and if possible, remove this item from your mortgage arrangement. Keep in mind, though, you can cut this expense only to a point. Lenders will almost certainly proscribe minimum insurance requirements.

Make extra payments whenever you can

If monthly rates are low enough to allow a comfortable life, people often allow this considerable financial obligation to slip off their radar. But, the debt is still there and interest rates are piling up. Because of that, it is highly advisable to make extra payments whenever your household budget allows you. Even the small extra sums that aren’t disrupting your daily life can cut the repayment periods by whole years and save you a lot of money you would otherwise spend on interest rates.
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Downsize when you can

Downsizing is often looked at as a move produced by necessity. In reality, though, it is really a matter of convenience. You may have overestimated your needs when you bought your first property. Your kids may be moving out. Or, you have just found a smaller but more functional and sustainable property. In any of these cases, downsizing seems like the only logical solution. Consider the option to bargain the considerable equity you already own to lower the loan amount of the new home as an added bonus.

We hope these few strategies will help you lift at least a part of this considerable financial burden we like to call mortgage off your shoulders. Buying your first house is a moment that deserves to be cherished. Don’t allow it to become the decision you will regret whenever the time comes when you need to repay the latest rate.

By Mike Johnston