The term mortgage savings seems like an oxymoron. We don't usually associate savings with a mortgage. But if you're thoughtful, careful, and practical, you actually can save money with your mortgage even if you didn't find the best mortgage rates.
Whether you're just buying your house or you're locked into a mortgage, there are ways you can make sure you are getting the best deals possible.
For new buyers
Just buying a house? Congrats, and here are some tips to help you out.
1. Use a mortgage broker. Banks can't find you the best mortgage rates because they can only give you their bank's best offer. A mortgage broker can find the best mortgage rates from any bank.
2. Ask the seller to include closing costs in the house price. This is called a 6% seller concession. The seller adds 6% to the cost of the house and you pay it to them, but they give it back to you. Sound confusing? Basically, if you buy a house for $150,000 and add 6%, or $9,000, you'll pay $159,000, and the seller will refund you the $9,000.
Why would you want to do that? Because mortgage payments are tax deductible. Use the $9,000 to pay closing costs on your new house, which you would have to pay anyway. Now those payments are tax write-offs instead of further expenses.
3. Don't be afraid to negotiate. Again, a mortgage broker you trust can help here. Banks are in competition for your business, so tell them their best mortgage rates simply aren't good enough, and see what they can do.
For existing home owners
Whether you got the best mortgage rates or not, you can still learn how to mortgage effectively. Here are some tips to help you make the most of your mortgage savings.
1. Pay off the principle. You should write that in big letters and tape it over the door to your house. Whenever you have enough money to make a payment against your principle, do it. Lower your monthly payments if possible -- they're mostly interest anyway -- and put the resulting money into yearly payments against your principle.
2. Try to change your mortgage to make bi-weekly payments instead of twice monthly payments, or monthly payments. This will result in you making a few extra payments each year, and those payments will go directly to your principle. It's a very small change that significantly reduces the term and interest of your mortgage.
3. Consider taking out a line of credit and using it to pay down your principle. That way you can put a large sum down on your mortgage without feeling like you're broke -- you'll still have money available in case of emergencies.
Mortgages have become rather ridiculous, but you can still make the most of them. Try these tips and start your mortgage savings today.