Taking care of housing is one of the most important, if not the most important thing that every person hopes to do in their life. The sooner you get a roof over your head, the easier everything else will come in life. Sadly, the world does not work like that and a great percentage of people go their entire lives without owning the properties they call home. Affording a house or an apartment is getting increasingly harder every year as inflation rises and the economic situation in the world worsens.
For decades though, one system has managed to help many get their first home eventually and that is mortgage. Although not ideal, getting a mortgage on a property and paying it off until it eventually becomes your own is the next best thing. Everyone would without a doubt choose to own a home immediately but they are not in a financially stable situation to it right away.
If there is a need to move due to work or other reasons, and a person does not want to rent a home, they may want to think about a mortgage move. This too can be done in more ways than one. What is more, it is even possible to refinance and save money on a mortgage move but only if you do it right. In case this is something you are interested in and in need of, keep reading to learn more. Moreover, make sure to check out Nuborrow to learn more about saving on mortgage moves.
1. A New Monthly Payment
The basis of refinancing a mortgage move involves taking a new loan to pay the balance you have left. If you restructure the deal, you could end up with a smaller monthly payment that will be easier to deal with in the long run. Changing the terms of the whole loan plan often gives the mortgage owners smaller interest rates, resulting in a lot of money being saved over the fixed mortgages for years to come. For example, the average rates for fixed mortgages of 30 years is around 2.8%, and for 15-year deals it is about 2.15%. If you owe some $150,000 over 15 years and can lower your original mortgage interest rate down to those 2.15% from, let’s say, 3.25%, you end up saving more than $14,000. This is a basic example to illustrate the mechanisms at play and it is a bit more complex than this, but the general premise remains. There may be some fees applied and your credit score could dictate how better off you can be, but things should be easier if you refinance it.
2. Extra Payments When You Can
Saving money on interest is not something you will always feel, but when applied to the entire mortgage length it is a considerable amount worth saving. Whenever you can do it, you should think about making an extra payment towards your mortgage. Wherever the money comes from, you can put it towards a larger payment than you have to make. If you can pay $1,320 instead of $1,260, your interest rate remains the same but you end up paying less total money and you will be done with it earlier. If the loan is $250,000 and you pay it over 26 years, the total interest comes down to over $141,000. When you pay the extra $60 every month, you pay only around $130,000 over 24 years. This works in multiple examples, either by paying mortgage every two weeks instead of monthly, making an extra payment during the year, or increasing every payment by a small amount you can live with. Whatever works for you really. The good thing is that you will be saving in the long run and the home will be yours sooner.
3. Ending the Insurance Earlier
Down payment can make or break your entire mortgage loan, or at least make it easier or harder to deal with. When you pay less than 20%, you will have to get a private mortgage insurance, also known as PMI. This is how the lender protects their business in case the (future) homeowner fails to repay the loan. The lenders differ in their approach here but usually there is a monthly payment of between $30 to $70 one every hundred thousand dollars borrowed. If you are unable to put down the 20% down payment, the PMI enters the picture. However, once you cross the 20% threshold of your mortgage, you can eliminate the PMI payments for good. If you end up with enough money earlier, eliminating the PMI will be of great help and save you money. This form of refinancing takes time, but it does help in the long run. The insurance does not always drop off automatically either, as a full refinancing may be in order for you to get it.
4. Reviewing Your Budget
This does not have to do with the mortgage moves and money you need for the down payment or the monthly payments. It is more in relation to your life and how much you both earn and spend. You need to review your budget from time to time and think where your money is going. Changing a few things in your life can be of great benefit to your general mortgage plan and save you thousands of dollars. Track your spending and examine where most of your earnings go. Most people realize too late that they do not need to spend nearly as much money as they are used to spending. Trimming here and there or eliminating certain things entirely will leave you with more money on the table, portion of which can be put towards paying your mortgage sooner. Refinancing the mortgage loan itself is not the only way to deal with it easier. You can save money by changing your lifestyle just a tiny bit. Some of the things you save could go towards your retirement savings, and the rest can be for the monthly payments. You do not have to cut back on what makes you happy, only what you won’t miss!