Buying a home can be costly and for many it's one of the biggest financial decisions they will ever make. It may feel like you are emptying your bank account when it comes to coming up with a down payment, paying closing costs, and all those other fees that come along with buying a home. Once you have paid a great deal of money upfront you can sit back and relax right? Not so fast. You still have those monthly mortgage payments for the next 30 years for some, as well as mortgage interest to factor in. Mortgage interest alone can add up to tens of thousands of dollars extra you will pay over the life of your mortgage loan. What if you could pay your mortgage off early and drive down the amount of interest you end up paying over the life of the loan? It can be done and here are three ways to help you do just that and not go broke at the same time. An extra payment a yearBy making one full extra payment a year applied to your principal you could help knock a few years off the life of your loan. The next time you get a bonus consider putting it towards an extra mortgage payment. Many lenders don't charge a penalty for paying off a loan early and you could reduce the life of your loan by four years by making one extra payment a year. Boost your monthly paymentIf the idea of making one extra payment a year in one lump sum is intimidating to you consider paying a little more each month towards the principal of the loan. For instance, if you have a $200,000 loan at 4% interest then over the course of your 30-year loan you will pay out $143,739 in interest alone. Wow!! However, if you pay an extra $100 each month towards the principal of the loan you could reduce the life of the loan by five years and pay $27,000 less in interest. Shorten loan term through refinancingIf mortgage interest rates were higher when you bought your home, consider refinancing and lowering the length of the loan to a 10 or 15-year loan term. Shorter term loans tend to offer lower interest rates but in many cases, you will need at least 20% equity in your home to avoid paying private mortgage insurance. With a shorter term loan your monthly mortgage payment will go up so budget accordingly before doing so. There will be fees associated with refinancing your mortgage and you should plan to stay in your home for an extended period of time to make refinancing the right option for you. The Silva Group is comprised of Philadelphia area's best and brightest in the real estate industry and we are here to help you with all your real estate needs. Contact us today to see how we can help.
