Steps To Slash Your Mortgage

by Chris Lang on October 19, 2010

Mortgage loan Ever since the beginning of the rumors last month how RBA may begin a rate hike, mortgages are on everyone’s mind. The reason why is quite obvious – the higher the cash rate, the more people with variable mortgage rate will pay every week, every fortnight, every month. This is why I declared this week the “Mortgage Week” – which means that we will discuss ways of making your mortgage easier to live with all week through. The following article was contributed by William Eve from Home Loan Finder.

Steps To Slash Your Mortgage

If you think there is no way to cut down your mortgage cost you are wrong. From the day you sign on the dotted line all the way through the life of your loan there are ways to cut costs and pay off your loan faster. You simply have to be dedicated to paying it off as fast as possible in order to save the maximum amount of money.

The household mortgage is almost always the biggest bill you have to pay each month. That is not necessarily a bad thing, since it comes with a home that is also probably your biggest investment. Even so, it would be nice to be able to cut our bill down a little bit or even pay it off early. You might think that once you set up your mortgage you are locked in at that payment for the next thirty years and there is no way change it, however that is not always true. You are tied to your mortgage for a long period of time, but you can decrease those costs by making some smart financial moves in the beginning and during your mortgage term.

Steps to Cut Your Mortgage Costs

Step One – Pay off those upfront costs. Even though they are called up front costs, things like loan establishment, settlement, and mortgage insurance are usually tacked on to your loan. This makes your monthly payments higher which also adds to the amount you spend on interest. If you pay all those costs up front you can save yourself tens of thousands of dollars over the life of your loan. You can even take it a step further by not waiting to make your first mortgage payment and doing it on the day you close on the house, that way you will already be one step ahead of schedule right out of the gate.

Step Two – Use extra cash toward your loan. Outside of your regular mortgage payments you can use any extra money that you have to pay down the principle loan balance. If you have extra money in a savings account that is not earning much interest you are much better off using it to pay extra on your mortgage because you will save more then you can earn. In some cases making just one extra payment can cut off several months of your loan term. The savings that brings once you consider your payment and the reduction in interest can add up lightening fast. If you work on commission or regularly get bonuses consider putting any of the extra money you do not need to maintain your household to the mortgage. You probably will not miss it from your budget but you will see it in your reduced loan balance.

Step Three – If you have a variable rate loan or if you refinance to get a lower interest rate continue making your original loan payments. That way you will be putting lots of extra money toward your loan without a significant impact on your cash flow. Again, this reduces your principle faster which lowers the amount you spend on interest and cuts years off your loan term. Just make sure that you will not be penalised for paying off your loan early or if you are charged a fee that it is worth the expense.

Step Four – Get a short term loan. If you take out a mortgage for a shorter term your payments will be higher but you will have to spend less on interest, cutting down significantly on the overall cost of your loan. If at any time you find that the payments are more then you can handle you should be able to switch to a standard mortgage. This option is only good for those borrowers who have the tenacity to make sacrifices in the short term in order to pay off their mortgage.

Getting ahead on your mortgage is an excellent way to be financially secure. All you have to do is follow a few steps and you too can be on your way to owning your home out right and ridding yourself of that big monthly payment.

This article is from Will from homeloanfinder.com.au

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