How to Save on Your Mortgage
Buying a house is a big step in anyone’s life. Owning a home is a big responsibility and is often the cause of many financial problems. A mortgage usually takes up approximately 60% of a family’s monthly expenses. That doesn’t even include expenses related to owning a house such as; routine maintenance on the interior and exterior of the house, maintaining the landscape and yards, and the utility bills.
Paying off your mortgage as soon as possible is sound advice that will free up your financial responsibilities and allow you to live a more luxurious life. At first glance, buying a house with a mortgage may seem like no big deal, but after you see the cost of a mortgage you might change your mind.
For example, if you were to buy a house and take a typical out a mortgage of 30 years for $200,000 with a 5% interest rate you will be spending $386,511 dollars over the term of your mortgage. You will be paying almost double!
Even if you drop the interest rate to 4% you will be paying $343,739. While that is a $40,000 saving over a 5% rate, you’re still paying out $143,739 in interest.
Taking out a mortgage is a necessary evil for most home owners as they do not have hundreds of thousands of dollars sitting in their bank account. You can minimize the additional cost of a mortgage by doing a couple different things.
First, you can save up as big of a down payment as possible to lower your mortgage.
Second, every time you pay your mortgage you can pay more than your monthly payment. Any extra money will be applied to the principal. Mortgages are setup so that you are paying almost all interest in the first years of the mortgage. For example, the first payment of a monthly mortgage of $1073.64 – $833.33 goes to the interest payment while the remaining $240.31 goes to the principal and lowers your mortgage. If you pay an extra $200 that month for a total of $1273.64 you practically double the amount you pay to the principal which results in less interest in all the future payments.
By following these simple steps you will be able to save tens of thousands of dollars on your mortgage and live with less worries in your daily life.