Ways to Cut Mortgage Expenses
The amount you borrow, the finance charges—which combine interest and fees—and the time it takes you to repay, are the factors that make buying a home expensive. So Monson Savings Bank is helping you to find ways to reduce one or more of them to save you money.
Make a larger down payment.
The less you borrow, the less interest you’ll pay. Since the interest is calculated on a smaller base, your payments will be lower. And if your down payment is at least 20% of the purchase price, you won’t be required to purchase private mortgage insurance (PMI), which adds to your borrowing costs. The primary drawback to a larger down payment may be cutting too deeply into your savings, making it difficult to cover other expenses.
Consider a shorter loan.
With a shorter term, you pay less interest overall on the same principal. You may also qualify for a somewhat lower APR, which would reduce your total cost even more. But your monthly payments will be higher than if you chose a longer term, so you run the risk of committing yourself to larger payments than you can afford.
Make more payments.
You can pay more than the amount required by your contract, either by making more payments or paying an extra amount with each regular payment. If you do the latter, be sure to make it clear that the extra amount should be used to reduce principal, not prepay interest. Lenders may offer a bi-weekly payment plan, but managing the extra payments yourself gives you more flexibility and may reduce the loan faster. Be aware that taking this strategy may cause you to pay off before you reach the full term. While that can be a good thing, some mortgages have prepayment penalties, which will charge you a fee for paying your loan off early. Talk to your lender to be sure that you understand all of the terms of your mortgage and the associated fees.
Want to talk to a Residential Lender to discuss your mortgage loan options? Contact any of our Residential Lenders to get started. They will answer your questions and help find the perfect mortgage loan for your needs.
