Money Management: Save Money on Your Mortgage
The Bad Credit Mortgage Zone tells you how to manage your mortgage and stay on top of the paperwork.
Once you have a mortgage, you will constantly ask yourself whether or not you made the right choice. Perhaps interest rates are lower than they were when you took out your loan. Perhaps you have friends or neighbors who got better deals. Perhaps you have developed better money management skills. Instead of living with regret, there are many steps you can take to make sure that you are getting the best deal available. Before we get into the details, however, it’s important that we make sure your finances are properly organized. Make sure that you have a file dedicated to your loan, as well as a computer spreadsheet program for quick summaries and projections of previous and future expenses.
Once everything is in order you should examine your loan. Make sure you aren’t paying for Private Mortgage Insurance if you have already payed off twenty percent of your property’s appraised value. Sometimes this doesn’t happen automatically, and you will need to be proactive if you want to stop paying the fees. One expert recommends that you send in payments with the label “apply to principal” until the PMI disappears, or simply contact your lender. By taking a few minutes out of your day to do this, you may end up saving hundreds of dollars per month.
If you are wondering whether or not you should refinance, a good rule of thumb is to do so only if you can knock off an entire percentage point. Anything less won’t do you much good, and may even end up costing you more money due to the additional fees that you will have to pay. Use your spreadsheets to calculate whether or not you can save money long-term by refinancing, and if you can then go for it. Otherwise you’re literally throwing money away.
Some people feel the urge to pay off their mortgage as early as possible. If you’re one of the lucky ones who aren’t living month-to-month, this may seem like the obvious choice. However, you should calculate the money you would save by paying your loan off early and compare it to the money you could make by using your extra funds to make safe investments. The numbers may surprise you, and although it is nice to own a home, it is nicer to own a home and have a large retirement.
Pro Tip: Don’t spread yourself thin with investments and mortgages. Leave some money in your account for the small luxuries in life. It’s fine to plan for the future, but do remember that you’re currently living in the present. Practice smart money management.
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