Home Mortgage Loans
Affordable Home Mortgage Loans
Home Loan Is The Biggest Expense
For most American families a payment on a home loan is often one of the biggest expenses in their monthly budget. It's not surprising considering the fact, a home is generally one of the biggest expenditures you make in your life.
Usually there are a good number of different fees charged by mortgage lenders required during the process of obtaining a home loan. Some of these fees are payable upfront (such as loan origination costs). While other come as ongoing monthly fees, bundled into payments of the loan principal and interest.
Loan Costs, Deducted or Amortized?
Additional items that are not a part of the home loan, such as taxes, insurance and mortgage insurance, in many cases are also rolled into the monthly payments on the loan. These extra expenses have to be accounted for when estimating the true cost of new home financing and penning it into your monthly budget.
A portion of the mortgage origination expenses (points, fees,
mortgage insurance premiums billed at the time of origination)
could be tax deductible in the year when your got your loan.
Others can be deducted, or amortized over the length of the
loan on your annual tax returns in the years following the
origination.
Shorter Term Loans = Big Savings
One of the most obvious but often overlooked ways to cut down the overall amount of interest you pay on your home loan is to opt for the shorter term loan, such as 15 or 20 years loans, rather than conventional 30years. The payments will be a little higher, however the total cost of the loan can often be reduced by tens and even hundreds of thousands.
Here are several more tips and methods that will allow you to to reduce your overall house loan costs over its lifetime:
Always negotiate loan origination fees with your lender
Request a duplicate of a written figure of all loan costs (lender is responsible to give this to you by federal RESPA law): origination costs and fees, interest rate, overall cost of interest over the life time of the loan, mortgage insurance if applicable. Prior to the closing of your loan assess the final closing statement and review it up against the initial cost disclosure given to you. Object to any unreasonable boosts in costs, since they are unlawful.
Adjust your payment frequency
If you get paid bi-weekly and your budget allows this, you could change your payments from monthly to semi-monthly. You spend about the same amount each month, but simply pay one half of your monthly payments on the 1st, another on the 16th. This will substantially speed up your home loan payoff. Be sure to check whether your lender allows this option and if you need a 3rd party service provider to facilitate this for you.
Make additional principal payments
You will amortize and pay off the loan faster. Practically all home mortgage loans today contain clauses (provisions) allowing you to make extra payments towards the principal balance of the loan. These provisions give you the freedom, but not the obligation to contribute a supplementary amount with any of your regular monthly payment anytime it suits your budget. The important thing is to identify this extra amount to apply towards 'principal'. Most loan coupons have the line for extra principal.
Put a greater (20%) down payment
Your lender will require you to purchase (and incur a substantial additional cost of) so-called mortgage insurance. It protects the lender in the event of default from borrowers who put less than 20% down. A down payment amount of 20% or higher will allow you to get rid of the mortgage insurance premiums. You'll also reduce the total amount you're borrowing from the bank. You can write to your lender and request to drop the mortgage insurance after your loan has been paid down below the 80% of the current market value.