Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Tips to Save Money on Your Mortgage

Orange County, CA – If you’re lucky enough to be locking in your mortgage right now, good on ya! You’ll be saving thousands of dollars compared to someone who locks in later when rates are considerably higher. But that doesn’t mean that you don’t want to cut your mortgage payments even more, right?  As it turns out, there are a few ways to do just that. They all involve a bit of financial planning and a slightly higher up-front burden on your budget. But they’re easy and highly effective.

Tip 1: Round Up on Your Mortgage Payment

If your mortgage payment comes to $1473/month, round up and pay $1500 every time you pay. An extra $27/month is a paltry burden. But every dollar of that extra $27 goes directly to the principal of the loan. Over the course of 30 years, that extra amount each month can knock a full year or more off of the lifetime of your loan — especially if you combine it with our next tip.

Tip 2: Pay Once Every Four Weeks

Rather than paying attention to when your lender tells you that your payments are due, instead pay a full mortgage payment (rounded up, hopefully!) every four weeks like clockwork, ignoring what part of what month it is. What you’ll end up doing is making 13 payments every year instead of 12. Plus, that 13th payment will go entirely to principal again, taking it down a big notch. Combining this with the above example: if you pay just $27 extra every month, you’re paying an extra $324 on the principle in a year. If you pay every four weeks in addition, then you’re paying an extra $1824 on the principal in a year.

An alternative method is to divide your monthly mortgage payment by 12. Add that amount to your normal monthly payment and by the end of the year you’ll have made 13 full payments.

Tip 3: Refinance into Higher Payments

Most people think of refinancing as something that you do to lower your monthly payments. But lower payments also equates to more interest in the long run. Instead, refinance to increase your monthly payments. The easiest way to do this is by shortening the length of your mortgage from 30 to 20 or even 15 years. You’ll pay less interest because a greater amount of your payment is reducing the principal balance. On top of that, you’ll get a lower interest rate thena  comparable 30 year fixed loan. While you’ll be paying a noticeably higher payment in the short term, your future self will be very glad that you endured.

Suffice it to say, if you refinance and then also round up and pay every four weeks, you’ll be a virtual maniac of fiscal responsibility. You’ll also end up paying off what was once a 30 year mortgage in less than 15 years, and you’ll save yourself thousands of dollars in interest by doing so. 

The one caveat in all of this is “pre-payment penalties.” These fees are usually charged in the early years of the loan so that the lender can recoup their upfront expenses. Ask your lender and make sure that you’ll actually end up saving money with these financial tips before you start instituting them.

Scott Storace

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