Homeowner Tricks: Save Money on Mortgage Payments

Whether you’re new to homeownership or have been making mortgage payments for years, it never hurts to find ways to slash your costs. Here are three tips that can help you save thousands.

1. Pay your mortgage every two weeks instead of once a month

The typical 30-year loan comes with 360 payments, or 12 payments per year. But if you take your monthly payment, divide it in two, and pay that amount every two weeks, you’ll wind up making the equivalent of one extra monthly payment each year while saving yourself a huge chunk of interest in the process. And that single extra payment won’t hurt much, unlike a big lump-sum payment, especially if you work your new payment schedule into your monthly budget.

Say you’re looking at a 30-year, $200,000 mortgage at 4%, which would normally translate into 360 monthly payments of about $955 each, or roughly $11,460 a year. If you were to switch to a biweekly payment schedule, you’d pay $477 every other week, or roughly $12,400 a year. But in doing so, you’d actually save yourself over $23,000 in interest over the life of your loan.

2. Refinance to a shorter term

One drawback of refinancing a mortgage is that it often resets the clock on your repayment schedule, which can not only cost you more money than necessary in interest, but drag out the repayment process so that you’re less likely to have shaken your housing debt by the time you retire. For example, say you’ve been making payments on a 30-year loan for five years, and then you refinance to another 30-year loan at a more favorable rate. While you’ll lower your monthly payments, you’ll also be five years older when you finally get that mortgage paid off.

On the other hand, if you refinance to a shorter term (say, from a 30-year loan to a 15-year loan) to take advantage of a more favorable rate, you’ll save money on interest and avoid extending the amount of time you’re saddled with mortgage debt. Of course, this strategy only works if you can actually afford a larger monthly payment. (Remember, while you’ll benefit from a lower interest rate, your actual payment will still be higher if you switch from a 30-year loan to a 15-year mortgage.) But if your earnings have increased substantially since you first signed your loan, and you have room in your budget for higher monthly payments, you’ll come out ahead in the long run.

Homeownership is an expensive prospect, so it pays to take steps to lower your costs. These tricks will help you spend less on your mortgage and keep more of your money where it belongs — in your pocket.

3. Accelerate a 30-year loan when you can’t afford a 15-year term

One major advantage to getting a 15-year mortgage, as opposed to a 30-year loan, is that you’ll generally be eligible for a much lower interest rate. For example, last week, 30-year fixed mortgage rates averaged 3.97%, while 15-year fixed rates averaged 3.23%. The downside, however, is that because you’ll be paying off your loan in half the time, despite the lower interest rate, your individual monthly payments will be considerably higher.

If you’re looking to benefit from some of the interest savings of a 15-year loan but are afraid to commit to a more sizable monthly payment, a good solution is to get a 30-year loan and simply pay it off faster. You can accomplish this by doubling your monthly mortgage payment when you have extra cash available or by making extra lump-sum payments toward your mortgage as you’re able.

Say you have a 30-year, $200,000 fixed mortgage at 4% interest, and you use a performance bonus you receive at work to make a $5,000 payment toward your mortgage during the second year of your loan. That move alone will save you close to $10,000 in interest and shave more than a year off the life of your loan.

If you want to attempt to pay off your mortgage early, just make sure your loan doesn’t come with prepayment penalties. Otherwise, you’ll be charged a fee for the privilege of wiping out your mortgage debt sooner.

25 Tips Every Homeowner Needs to Know

There’s a lot of work involved in moving into your new house and getting settled. It would be nice if your house came with a homeowner’s manual explaining all this. But that won’t happen unless you buy a new house from a very responsible builder. So our new homeowner tips is meant to guide you through your first year in a new house.

Here are recommendations on what you’ll want to do once you’re in your new home. Even if you’ve been in your house for several years, you may find things you missed. Some tasks only need to be done once. Other homeowner tasks should be reviewed every one to two years.

  1. Start building your home maintenance team (listed above). You’ll want to arrange for services like house cleaning, lawn care, pool cleaning and pest control right away. Then you should make needed repairs, starting with …
  2. File a change of address with the post office. Ask about a new resident packet which frequently contains discount coupons to local stores like Lowe’s.
  3. Paint the ceilings while the coast is clear, as they’re the toughest to reach with furniture in the way. This will give you time to pick your wall colors and paint rooms as you decide how you want to decorate.
  4. Review your home inspection report and create a punch list of needed repairs. These should be done before you start home improvements and other decorating. Here are priorities to guide your timeline:
    • Repairs to keep your family and guests safe.
    • Problems that involve water. This includes water penetrating your home from outside and interior leaks.
    • Updates that will reduce your energy bills and extend the life of major home systems.
  5. Research discount programs offered by local utility companies.
  6. Review your homeowner insurance policy with your agent to make sure you have the correct coverage. Don’t be surprised if you’re missing something … or you have more coverage than you need.
  7. Add contact information to your smart phone for your insurance company, utilities and home maintenance team.
  8. Change your driver’s license and car registration. Check state requirements as you may only have 10 days.
  9. Confirm your deed has been officially recorded about two weeks after closing.
  10. Check to see if you’re eligible for any property tax discounts. Often known as homesteading, you may find them for primary residence, seniors or even retired military.
  11. Setup a homeowner budget. Make sure you’re saving enough for property taxes and insurance if your bank didn’t require them to be put into escrow. You should also set aside money for preventive maintenance and repairs.
  12. Change your locks. If you’re considering smart locks, take time to think through your choices. Consider the multiple devices you want to control remotely, and you’ll save money with one shared controller.
  13. Ask your utilities to mark where their lines are, a free service so you don’t accidentally sever a line when installing a mailbox, fence, etc. Make a map with the lines for future reference.
  14. Don’t put your name outside the mailbox. Put it inside for the mailman.
  15. Buy gardening equipment needed to maintain your yard. It’s easier to start right away versus catching up after ignoring shrubs and flower beds for six months.
  16. Find your main water shutoff and learn how to turn your water off.
  17. Check the temperature on your hot water heater. Turn it down to 120º to avoid burns and save money. Your HVAC and/or plumber can help with this.
  18. Review you main electrical panel to make sure it’s properly labeled. Practice shutting off power and buy circuit breakers if needed.
  19. Schedule an HVAC maintenance tune-up to insure your system is running efficiently.
  20. Have your home cleaned before moving furniture into the house. It’s also the perfect time to get your carpeting cleaned or floors refinished.
  21. Meet the president of your condo/homeowners association. Learn about local customs, like getting exterior paint colors approved.
  22. Make a copy of your closing papers and store outside your home. Use an old fashion safe deposit box or scan and store documentation online, in case of a fire.
  23. Make a photo or video record of your home and personal possessions.
  24. Identify high value items and make sure they’re covered by your homeowners insurance. Review your policy now, as you probably didn’t have time before the closing.
  25. Meet your neighbors. Introduce yourself and learn what hobbies and interests you have in common. Share contact information with immediate neighbors (8 recommended).