Mortgage Saving Advices
Getting a mortgage is a good way to finance the purchase of the desired home. However, there are certain ways in which you can save money from the mortgage. This article elaborates on some of them.
First of all it never hurts to run some negotiations with the lender regarding the fees and interest rates you should pay. You can even ask about waivers especially on the fees you can go by without. The real cost of the loan is determined about the following charges:
- Processing fee
- Appraisal fee
- Inspection fee
- Credit report fee
- Title fee
- PMI (private mortgage insurance)
The lender doesn't earn money of these fees. On the other hand, the other fees go directly into the account of the lender. So, you can see how much you can negotiate to reduce them.
After you have examined the fees you will be charged, you have to check on the right type of mortgage for you. Don't jump straight out on a 30-year fixed-rate mortgage. You should have in mind that it is one of the most expensive types especially if you don't think of keeping the property for a long time. Thus, your choice on the type of mortgage should be partly based on the length of time you will spend in the property. After this, look at the monthly payments you will be required to make.
It is recommendable that you make some additional payments. The reason for this is that these extra payments are directed to the principal and as a result it is reduced. Do this and you will benefit from paying less interest and less time will be needed to pay back the mortgage.
The frequency with which you make payments also matters. So, instead of making payments once per month, it may be good to do it bi-weekly. The result is a form of an extra payment.
Another good advice you can follow to save some money from your mortgage is to avoid paying private mortgage insurance. This can be done by making at least 20% down payment. On the other hand, if you cannot afford do this, you can cancel the PMI when the equity on your home reaches 20%.
Finally, many people decide to buy discount points so that they reduce their monthly payment. However, you should check whether purchasing these points will really save you money on your mortgage. This should also be done in the light of the length of time you will keep your property.
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