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Housing in the USA: 10 life hacks that will help you save a lot on your mortgage

According to Value Penguin, the average monthly cost of a mortgage in the US is $1492 per month. Thus, it is usually one of the largest items of human expenditure, reports Entrepreneur.

Photo: Shutterstock

If you want to reduce that monthly payment faster, there are several mortgage hacks you can implement that will save you thousands of dollars on your mortgage.

Trick #1: Get rid of PMI insurance

Private mortgage insurance, or PMI, is insurance that protects the lender if you default on your mortgage. PMI is required if you have a regular loan and make a down payment of less than 20 percent of the value of the home.

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However, even if you have made a small down payment, there are several ways to get rid of PMI. One way is to simply make additional mortgage payments until you hit the 20 percent mark in your net worth. At this point, you can contact your lender and ask them to cancel your PMI insurance. If you don't know how much your home is currently worth, you can always take an online home appraisal.

Another option is to refinance into a different type of mortgage. For example, you can refinance an FHA loan into a regular loan once you have built up enough equity. There are also several new types of loans that do not require PMI insurance even with a small down payment. So, if you are tired of paying for PMI, be sure to explore all options for potentially getting rid of it. This can save you hundreds every month.

Trick #2: Make biweekly payments instead of monthly

Most people are used to making monthly mortgage payments, but there is another way that can save you money and help you pay off your home even faster.

If you make biweekly payments rather than monthly, you will end up making 26 5% payments each year instead of 12 full payments. This can cut your mortgage by several years and save thousands of dollars in interest payments.

In addition, biweekly payments can help lower your overall debt burden, making it easier to qualify for a home equity loan or line of credit in the future. So if you're looking for a way to succeed financially, consider switching to biweekly mortgage payments.

Trick number 3. Refinance the loan for a shorter period

One easy way to save a ton of money is to refinance your loan for a shorter term. While this may seem counterintuitive—after all, shorter loan terms usually mean higher monthly payments—you'll save a ton of money in interest in the long run.

For example, let's say you want to refinance a $300 mortgage for another 000 years. Your 30% mortgage payment will be about $4 per month and you will pay $1432 in interest over the life of your loan.

However, if instead you refinance your $300 mortgage for 000 years, you will only pay $20 in interest over the life of your loan. Yes, your monthly payment will be higher at $136 for 305 years, but your overall savings in interest will be significant.

So if you can raise your monthly payments, you can get out of your mortgage faster and save a lot on interest if you refinance for a shorter term. Alternatively, you can also pay more every month instead of refinancing and “cutting” the term yourself.

Trick #4: Refinance at a lower interest rate

If you're more focused on saving money on your monthly mortgage payment rather than long-term interest, consider refinancing at a lower rate. If you cannot negotiate a lower interest rate with your current lender, you can refinance at a lower interest rate with another lender. This is especially true if rates have dropped since you originally got the loan.

If you have lived in your home for several years and have accumulated capital, find out if this option is right for you by calling your lender and asking about current rates. If rates have come down since you originally financed your home, you can save money by refinancing. Be sure to compare the cost of refinancing with the amount of money you will save on monthly payments before making a decision.

To give you an example, a $275 mortgage with a 000-year mortgage at 30% has a monthly payment of $4. However, a 1412,89-year $30 CA mortgage at 275% has a monthly payment of $000, saving over $3 per month, or just over $1159,41 per year. What could you do with an extra $250 a year?

Use a mortgage calculator to find out how much you could save by refinancing.

Trick #5: Get rid of escrow accounts

Escrow accounts are often required by lenders as a way to ensure that homeowners have enough money to pay property taxes and insurance premiums. However, these bills can also add hundreds of dollars to the cost of a mortgage every year.

Luckily, there's a way to get rid of the bill: just budget your taxes and insurance, and then make the payments yourself. This may require extra effort on your part, but it can save you a significant amount of money in the long run. Just be disciplined in your budget to keep up with payments.

Trick #6: Make Extra Payments When You Can

If you have extra money, say, in the form of a bonus at work or a tax refund, consider making an additional mortgage payment. Even a small amount can help reduce the principal balance and save money on interest over the life of the loan.
Keep in mind that you should always have cash on hand in case of an emergency, so make sure you have it before you make an additional mortgage payment.

If you make enough extra payments over time, in addition to some of the other hacks on this list, you can absolutely pay off your mortgage early.

Trick #7: Pay Attention to Your Loan Repayment Schedule

Amortization is the process of distributing a loan into equal payments over a set period of time. Most mortgages amortize over 30 years, meaning that each monthly payment includes both principal and interest. However, the ratio of principal to interest changes over time.

In the early years of a mortgage, most of each payment goes towards paying interest. However, as the balance of the loan decreases, more and more of each payment goes towards repaying the principal.

If you want to save money on interest, keep a close eye on your amortization schedule and make additional principal payments whenever possible.

Trick #8: Negotiate a lower interest rate with your lender

To get the best possible mortgage rate, it's important to be proactive and negotiate with your lender. One way to do this is to compare the interest rates of different lenders. By shopping and getting quotes from multiple sources, you can put pressure on your lender to offer a lower rate.

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Another tactic is to ask for a "floating point" option, which allows you to lock in a lower rate if rates fall before you close your loan. While it may take some time and effort, negotiating a lower interest rate can save you thousands of dollars over the life of the loan. Even a small rate cut can save you thousands of dollars over the life of the loan.

Trick #9: Consider an adjustable-rate mortgage

An adjustable rate mortgage (ARM) has a low starting interest rate that typically lasts five or seven years (sometimes more). After that, the rate is adjusted depending on market conditions. If rates go up, your payments will go up. But if rates go down, you save money on interest.

“People often think that if they don't fix their mortgage for 30 years and interest rates don't go up, they will automatically 'lose', but that's not necessarily the case,” says Seth Burstein, CEO of website Lucky. “It helps people optimize their financial situation. If you take that initial savings and invest it, that money could more than offset the increase in mortgage payments after the rate adjustment.”

Just make sure you understand how ARM works before subscribing to them. And make sure you're comfortable with the idea of ​​increasing your payments in the future.

Trick #10: Live in your own investment property

Another way to speed up a mortgage loan is to buy a house with potential investment income. This strategy, also called “house breaking,” can give you extra money that you can use to pay off your mortgage or even live a free life.

Chad Carson, for example, bought a four-unit house as his first real estate investment. He lived in one apartment and rented out the other three. The income from the tenants allowed him to make monthly mortgage payments in addition to any maintenance payments. Thus, he could live there completely free of charge.

Conclusions

Ultimately, if you want to find ways to save money on your mortgage, these ten hacks are a great place to start. By paying attention to the amortization schedule, making additional principal payments, and looking for the best interest rates, you can save thousands of dollars over the life of the loan.

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