We can all agree with this — buying a house is a milestone. However, this can be financially draining due to mortgages and high interest rates. Paying your mortgage for decades may seem overwhelming, especially for first-time home buyers and those with limited financial resources. However, don’t give up just yet on purchasing your dream home. We’ll share nine ways to help you save on your mortgage.
- Build Your Credit Score
People with high credit scores are considered less risky. That’s why most lenders may offer lower rates if you have a high credit score. Remember, a good credit score increases your chances of getting approved.
Here are some tips on how to improve your credit score:
● Keep your credit card balance below 30% of your credit limit
● Pay credit card bills, utility bills, and loans on time
● Avoid opening multiple credit accounts
● Monitor credit reports or payment history
● Have a diverse mix of credit
2. Look for the Best Mortgage Rates
Finding the best mortgage rates doesn’t happen overnight. Spend time finding and comparing the best deals from various lenders. Consider the current market to help you find great deals. If you need professional advice, you may also work with a mortgage broker to help you find the most competitive rates. Remember, a little difference in interest rates can save you thousands of dollars in the long run!
3. Increase Your Down Payment
Are you planning your next vacation? Or are you saving up for a big purchase? If you’re purchasing a house soon, it’s time to eliminate unnecessary expenses. Instead, add that money to your down payment. Most lenders require you to pay mortgage insurance if your down payment is less than 20% of the purchase price. This insurance protects the lender in case you stop paying them. Increase your down payment to at least 20% or more to avoid paying for insurance.
4. Make a Lump-Sum Payment on your Principal
Lump-sum payments on your mortgage principal save thousands of dollars in interest in the long run. Many lenders offer prepayment privileges, allowing borrowers to make lump-sum payments or 10% to 20% of the original mortgage amount each year without penalties.
5. Consider Refinancing
Refinancing your mortgage means replacing it with a new one that offers better terms and interest rates, which can be a wise financial decision. However, that’s not always the case. Before considering refinancing your mortgage, review your loan agreement to determine if there are any penalties or fees associated with breaking your existing mortgage.
6. Switch to Bi-Weekly Payments
Instead of paying for your mortgage once a month, switch to bi-weekly payments. Bi-weekly payments reduce the overall interest and help you pay off your mortgage faster.
7. Use First-Time Home Buyer Incentives
If you’re a first-time home buyer – we have good news! Check out government programs that can help you save thousands of dollars on your down payment. For example, the Home Buyers’ Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) tax-free to put towards their down payment.
8. Take Advantage of Your Existing Debt
If you have a debt with a higher interest rate, you can refinance to combine all your loans into one mortgage payment. This will avoid paying multiple interest charges on different debts. However, you will be paying higher monthly mortgage payments monthly. Nonetheless, this strategy will help increase your cash flow while saving a few bucks.
9. Extend Your Amortization
Extending your amortization makes monthly payments more manageable for you. The downside is you will be paying more interest. So, before deciding to extend your amortization, consider the pros and cons and your financial goals.
Savvy homeowners know that taking full advantage of every available opportunity to save money on their mortgage can pay dividends in the long run. From refinancing at a lower interest rate, shortening your mortgage term, and making extra payments to reducing insurance costs – every strategy helps. Indeed, it requires knowledge, smart decision-making, and strategic action, but the reward of significant savings and financial freedom is surely worth the effort. Don’t miss your chance to master your mortgage and secure a brighter financial future. Confidence in managing your finances leads to greater security, prosperity and peace of mind.