Tips on How to Save Money on your Home Mortgage

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You may have heard people say “Invest in an asset that does not usually depreciate in value”, Leaving you wondering, does such an asset actually exist? Real estate is one such asset that mostly only appreciates in value. The largest and most important investment anyone can make is buying a house. With real estate investments, it’s very likely that you don’t have the lump sum required amount. If you have an existing property, then you could consider selling it for fund creation. However, if you’re a first-time home buyer, you need to think about how you’ll mortgage your dream home.

Following are some ways in which home buyers can save money on their mortgage.

Explore your options thoroughly and save up before hand

First time home buyers should explore their options thoroughly. Financial institutions will offer a variety of loans. One of the most important features of a loan is the interest rate, which will depend a lot on the size of the lump sum amount that’s available to you on hand. The higher the lump sum amount the better off you will be because you will be borrowing a smaller amount and spreading it over a shorter period hence making savings in interest.

Adjustable rate mortgage

This can be quite beneficial for someone who doesn’t have a fixed income. Basically, you would be expecting a large cash inflow sometimes and be in a position to repay some of the principal amount before the interest rate is reset. So when it is reset you will have a considerably lower amount of interest to pay. But an adjustable rate mortgage doesn’t take into account the uncertainties of life for instance someone losing their job, an accident or sickness etc. that affects your cash inflow.

Offset account

An offset account is a classic feature in a mortgage package. It allows you to make savings in interest and repayments throughout your loan period. It works a lot like a regular bank account but it’s linked to your mortgage account. You can make a withdrawal whenever you need some cash. Basically, you’re charged interest on the amount of your mortgage minus the  lump sum in your saving account. What that means is that you pay interest on a slightly smaller amount than your actual mortgage.

Making an Extra Annual Payment

If you’re spending smartly now and saving up then consider making additional annual payments. These can be one may be two in a year. You may feel the crunch at this point with these payments but it’s an opportunity cost because making these payments now can reduce your loan period by many months often upto two years. This can help you make savings in interest expenditures for that same period.

Consider reaching out to home loan specialists

They can help you make a sound decision because they are the experts in the field. Moreover, from knowing about any upcoming policy changes to having a strong understanding of market trends, home loan specialists will have the industry insider advantage. They can help you negotiate terms that may not be ideal but will be an optimal solution for circumstances.

You can also explore the websites of various financial institutions to find out what your options are going to be. However, you will have to make an in-person visit for a detailed discussion with a home loan specialist to choose the option most suitable for you. In the future, you will know how much you saved up by being a little smart now.

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