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3 Smart Mortgage Hacks That Can Save You Thousands of Dollars

Finding the right home that suits your budget can feel like a dream come true. If you do find a home within your budget and a mortgage at an affordable rate, do you realize that over a 30-year term, you will be paying thousands of dollars just in interest to the bank? You can avoid paying this much interest by following the below-mentioned hacks. 

Biweekly Payment

Instead of making one mortgage payment monthly, make half of the monthly payment every two weeks. So, essentially, what you will be doing is making two payments every month. By doing this, you will be making the equivalent of one extra mortgage payment per year. This one extra payment can shave a few years off the life of your mortgage.

Larger Mortgage Payment

Another thing you can do is make a larger mortgage payment. There are three ways you can do this:

  • Even if you buy a house that’s well under your budget, make payments to the extent that you can afford them. So, if you can afford to make a monthly mortgage payment of $2,200, but you are only required to pay $1,500, you can still pay $2,200 every month. Doing this will help you reduce your mortgage term significantly.
  • Can’t pay too much extra? No problem! You can round up your payments. Say your monthly payment comes up to $1,510, you could instead round it up and pay $1,600. 
  • You could also try to gradually increase your payments every few years. Given that your income is only likely to increase, you may be able to afford a lot more in the future than you can right now. 

Extra Payment

If you can afford to make one extra payment per year towards the principal (perhaps from bonuses, inheritance, or a tax refund), you can wipe off a significant amount of interest from your mortgage. 

Keep in mind that some lenders charge penalties for paying off your mortgage early, so check with your lender beforehand if they have any terms regarding this. Also, insist that your extra payment should only be made toward the principal amount, and not the interest.