Pay Your Mortgage Off Faster With These Money-Smart Strategies

Pay Your Mortgage Off Faster With These Money-Smart StrategiesAs with any loan or line of credit, there are benefits to getting your mortgage paid down. You’ll pay less in interest, potentially saving thousands over the repayment period. Moreover, you’ll own your home outright that much quicker.

Let’s explore four money-smart strategies that will help you to pay your mortgage off faster.

Start With The Obvious And Increase Your Payments

It won’t come as a surprise that one of the easiest ways to get your mortgage paid off is to increase the amount you put towards your monthly payments. Most lenders will allow you to place any extra funds directly against the outstanding loan amount or “principal.” This is very efficient as it avoids having to commit any additional funds to interest.

One trick that many families use is to round the payment amount up to the nearest hundred-dollar figure. For example, if your mortgage payment is $652.32, you would pay $700 instead. This might be an easy burden on your wallet but still amounts to an extra seven percent of your payment.

Accelerate Your Payment Schedule

Another way to get your mortgage paid off as quickly as possible is to accelerate how frequently you make payments. For example, if you are currently making payments on a monthly basis, you can switch to bi-weekly payments instead. This means that instead of 12 large payments per year, you’re making 26 smaller payments. However, your interest will still compound on a monthly basis which means that over time you’ll end up paying less in interest. Not all mortgage products support this, so it is best to check with your mortgage professional to ensure it is an option open to you.

Dedicate Your Tax Refund To Your Mortgage

If you receive a tax refund or other large sum of money, consider using it to pay your mortgage down further. This is an excellent use for a spare block of cash as it gets you one step closer to owning your home, free and clear.

Refinance Your Mortgage To A Shorter Term

Finally, one last strategy is to look at a shorter term for your mortgage. For example, if you started with a 30-year amortization, you can refinance down to a 15-year loan instead. This will require having access to significantly more money to place against your payment, so be sure to carefully budget for this additional cost.

These are just four of the many ways that you can get your mortgage loan paid off faster. For more information or to inquire about a mortgage for your next home, contact us today. Our professional team is happy to share additional strategies that can have you owning your dream home in no time.

3 Budgeting Tips to Help Make Your Mortgage Payments Easier

First-Time Home Buyer? 3 Budgeting Tips to Help Make Your Mortgage Payments EasierBuying a new home is an exciting time, but excitement can easily turn to stress if there isn’t enough money to pay the monthly mortgage bill. The added expense can take some time to get used to, but there are ways to make the payments easier, especially in those first few months when money is the tightest.

Prioritize The Mortgage Bill And Pay It Immediately

This may seem like a counterintuitive tip for anybody looking for help making mortgage payments, but it is easily the best one and the one that provides the most trouble for homeowners.

Late mortgage payments come with hefty fees that make it harder and harder to pay the next mortgage bill in full and on time. It’s a slippery slope that can end in foreclosure if the mortgage bills go unpaid for too long.

Don’t Get Carried Away With Household Spending

What’s the first thing most couples do after finally purchasing their first home? If they moved in from a smaller apartment then filling in the empty space will probably be at the top of their list.

Spending sprees are all too common after moving into a new home. There are extra rooms that need to be furnished and extra space that needs to be filled in with a larger television or another sofa.

These purchases will severely limit the mortgage budget and could lead to late payments right from the start for anybody who gets carried away. Put a budget in place for new furniture and stick to it so that there is always money for the mortgage.

Limit Spending In The First Few Months

The biggest change for anybody moving into a new home is the extra expenses they aren’t used to paying. Water, power, heat, air conditioning, internet and cable are all things that could be included when renting and once those bills start coming in it can be alarming.

It doesn’t matter how careful they are, budgeting can take a huge hit if new homeowners are expecting to pay the same as they were in their previous home. Always wait the first few months before making any purchases to get used to the new monthly bills that will be coming in.

Making mortgage payments starts with getting a mortgage you can actually afford. Make sure you consult with a professional who will be able to help you find the best deal and get a mortgage that won’t break the bank each month.

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Understanding the “Adjustable Rate Mortgage”

Understanding the Adjustable Rate Mortgage (ARM)When applying for a new home loan, there are several different types of mortgage programs available to most applicants. While there are various home loan programs to choose from, the most significant difference between the options relates to a fixed rate mortgage or an adjustment rate mortgage. Understanding what an adjustable-rate mortgage, or ARM, is in comparison to a fixed rate mortgage can help applicants make a more informed decision about their mortgage plans.

What is an Adjustable Rate Mortgage?

A fixed rate mortgage is one with an interest rate fixed for the entire term length. This means that a home loan with a 30-year term has an interest rate that will remain the same for the full 30 years, and this also means that the mortgage payments will remain the same over 30 years. On the other hand, an ARM will have an adjustable rate that will fluctuate periodically over the life of the loan, and the mortgage payment will also fluctuate as a result.

How is an ARM Beneficial?

There are several benefits associated with an ARM. For example, the initial interest rate and related mortgage payment are typically lower than with a fixed rate mortgage. In addition, if rates decrease over the life of the loan, the mortgage payment will lower as a result without the need to refinance to take advantage of the lower rate.

Before Applying for an ARM

Before applying for an adjustable rate mortgage, there are a few points that the applicant should keep in mind. Just as the interest rate may go down over the life of the loan, the rate and the mortgage payment may increase. The loan applicant should ensure that the upper limit for the interest rate and mortgage payment will be affordable for their personal budget before applying for this type of loan.

Each loan program available to a mortgage applicant has its pros and cons, and this holds true for an adjustable rate mortgage as well. Understanding how each loan program works and what the benefits and drawbacks are can help an applicant make an informed decision when applying for a mortgage. Call us today for help with your purchase or refinance.

Creating A Budget To Determine How Much Mortgage You Can Afford

Start with the Basics: How to Create a Budget to Determine How Much Mortgage You Can AffordA mortgage is typically one of the biggest monthly payments and financial responsibilities in your life. Mortgage payments usually impact the person’s budget significantly for several decades or longer.

While there are mortgage calculators online that can be used to estimate an affordable mortgage payment, it is important to start with a basic budget. A budget will allow you to more accurately determine how large of a mortgage payment is truly affordable before applying for a new mortgage.

List Income From All Sources

The first step to take in preparing a budget is to list all sources of income received regularly. This may include regular paychecks from both spouses, dividends, annuities, and any other sources of income that the individual or the family receives on a regular basis. Most budgets are prepared on a monthly basis, so ensure that the total amount of take-home income for a typical month is included in the budget.

List Recurring Expenses

Create a list of all expenses for the month to complete the next step in the budget-making process, and this should include utilities, minimum credit card payments, car loans, monthly food and gas expenses, and more. Ideally, it will include an allotment for savings, home maintenance expenses, and other expenses that the individual or the family may have. The more accurate your list of expenses is for the budget, the easier it will be to estimate a new mortgage payment amount that is actually affordable.

Think About Irregular Income and Expenses

It is important to think about irregular sources of income and irregular expenses. This may include seasonal income from a part-time or temporary job that is expected to continue into the future, as well as quarterly payments for homeowners’ insurance or annual property insurance premiums. While these are not monthly income sources or expenses, they should be accounted for.

When a person takes on a larger mortgage payment than the budget allows for, it can quickly become unaffordable to continue to pay over time. A high mortgage payment also increases the risk of a default in the event of unforeseeable circumstances.

It is best to set up a monthly mortgage payment that is affordable for the individual’s or family’s budget, and these steps provide basic guidance for establishing it. A trusted mortgage professional can assist with setting up a mortgage payment that is affordable based on the budget that is created. Call us today!

Four Things To Carefully Consider When Getting A Mortgage

Four Surefire Ways to Ensure That You Get the Best Possible Deal on Your Mortgage Taking the time to set up your home mortgage is one of the best steps that you can take to promote financial health and security. The best home mortgage is one with an affordable payment, that does not empty your bank accounts of necessary financial reserves and that will help you to establish equity at a fast pace. If you want to ensure that you get the best deal on your mortgage focus on these tips.

Consider the Loan Term Carefully

The most common loan term options are a 15, 20 and 30 year term. There will be a slight interest rate difference between these options, but the term itself will play a critical role in how quickly your equity increases as well as what your mortgage payment is. The payment should be affordable, and you do not want to set up a payment that is so high that you run the risk of defaulting. However, a shorter term with a higher monthly payment can result in less interest charges and faster debt reduction.

Think About the Pros and Cons of a Larger Down Payment

The amount of your down payment is also critical to setting up the right mortgage. When you make a larger down payment, you will have lower payments and may even qualify for a better rate. However, you also may be tying up your extra funds that could be used for investments or for debt reduction into your mortgage.

Shop For the Best Interest Rate

The interest rate variation from lender to lender may be fairly minimal when factors like the down payment, the term and your credit rating are constant. However, even a quarter or a half-percent difference in the interest rate will impact your payment amount and equity growth significantly. It can also impact your interest charge for your annual tax deduction.

Review the Closing Costs

A final point to consider is the closing costs. Some lenders may take on a higher fee with closing costs in exchange for a lower interest rate. It is important that you consider the difference in the mortgage payment and equity growth over time. Think about how long it will take you to recoup the up-front cost differential with the monthly payment differential. This can help you to determine which loan option is the most affordable overall.

Many will pay attention to the interest rate and loan term when shopping for a new mortgage. These are important factors to consider, but they are not the only relevant ones. Keep each of these points in mind if you want to set up the best overall mortgage.

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Refinancing: Important Financial Benefits

Save Some Additional Cash with Our Guide to Lowering Your Monthly Mortgage Payment If you are like many other homeowners, your home mortgage payment is the single largest expense in your monthly budget. This is a fixed expense that you will typically be responsible for until your loan is paid in full or until you sell your home.

If your home mortgage payment has become unaffordable or burdensome for you to manage with your current financial situation, rest assured that you may be able to save some additional cash each month without selling your home. Refinancing your existing mortgage can provide you with important financial benefits to help you better manage your budget.

How Refinancing Lowers Your Mortgage Payment

Refinancing your existing mortgage essentially will replace your existing loan with a new loan, but you may not understand how this will result in a lower mortgage payment. When you initially applied for your current mortgage, your payment was fixed based on the interest rates at the time as well as the original loan balance. Since that time, you likely have reduced your loan balance considerably, and interest rates may be improved as well. In fact, some homeowners are able to refinance to a lower rate, as well as pull equity out of their home in the process.

How Home Equity Could Further Reduce Monthly Expenses

While your main goal for refinancing a home mortgage may be to reduce the large monthly mortgage payment that you are responsible for, the fact is that you may be able to use your home equity to further reduce your monthly expenses. For example, you can use extra funds provided to you through a refinance to pay off an outstanding student loan, a car payment or a credit card balance. Some homeowners may even be able to pay off most or all of their debts by tapping into their home equity.

It is common for homeowners who have a high and unmanageable mortgage payment to feel overwhelmed and even trapped by their financial situation. However, as you can see, lowering your mortgage payment and even reducing some of your other expenses may be easier to do than you might think. If you are interested in learning more about how refinancing your mortgage may help you to improve your financial situation, you can speak with an experienced mortgage professional today.

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How Does Making Lump Sum Payments Affect Your Mortgage?

How Does Making Lump Sum Payments Affect Your Mortgage? Let's Take a Look Periodically, many homeowners will receive a rather sizable amount of extra cash. This may be from a bonus from your employer, a refund on your tax return, a financial gift from a relative or something else altogether.

While there are many things that you could do with your windfall, you may be wondering if paying down your mortgage balance is a wise idea. Before you make your decision about how to spend your money, consider what impact your lump sum payment will have on your mortgage.

Reduction in Principal Balance

The most obvious impact a lump sum payment will have on your mortgage is an immediate reduction in your outstanding principal balance. Your regular monthly payments will be applied to both interest and principal, but your lump sum payment will be entirely applied to principal. Therefore, you can expect to see a rather sizable reduction in the outstanding balance, and this will have a direct and positive impact on your home equity.

More Effective Loan Payments

Your required monthly mortgage payments will not be lowered when you make a lump sum payment on your mortgage, and you will still be required to pay the same amount to your lender going forward. However, your interest charges for each month will be adjusted. Your interest will be calculated based on the current loan balance each month. A reduction in outstanding balance lowers the interest charges. This essentially makes your future payments more effective at debt reduction and reduces the amount of interest you will pay over the life of your loan.

A Change to the Final Loan Payment Date

Because each of your loan payments going forward will be more heavily weighted on principal reduction than on interest charges, the fact is that your final loan payment date can be accelerated. Depending on the amount of the lump sum payment that you make toward your mortgage, this may be an acceleration of a single month, several months or even several years in some cases.

Making a lump sum payment on your mortgage can have many positive effects for you. However, this is not the only option available when deciding how to spend or invest your windfall. Compare these benefits against the benefits of other options available to determine your best course of action.

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Can You Really Afford A Second Home AND A Second Mortgage?

Buying a Second Home? Assessing Your Finances to Ensure You Can Afford a Second Mortgage The decision to buy a second home may be made for a number of reasons. For example, you may have a destination where you and your family love to spend free time, and you may be ready to settle into your own space in this location. You may considering the tax benefits associated with a second home, and you may even have plans to live in the home as your primary residence after you retire.

While there may be numerous benefits associated with the purchase of your second home, you may be concerned about how affordable it will be for you to manage the additional expense of a second mortgage payment.

Consider All Of The New Expenses Related To The Purchase

A second mortgage payment may be a rather major expense to take on, but it is not the only expense related to buying the new property. In order to ensure that the mortgage payment is affordable, you need to ensure that all aspects of secondary home ownership are affordable for you.

For example, consider HOA dues, repairs and maintenance expenses, property taxes, insurance and cleaning or lawn care service since you will not be available to handle these chores on a regular basis. If you can comfortably take on all of these expenses, you may make your purchase with confidence.

Increase Your Emergency Savings Account Balance

While your current budget may easily accommodate the new mortgage payment and the related expenses, the unfortunate truth is that your income or expenses may not remain static in the future. You may suffer from unemployment or a serious illness that reduces your income. You may have extra expenses due to a car accident or severe damage to a home.

These are just a few of the many things that can happen, and it is important that you have an adequate cash reserve in your emergency savings account that allows you to pay for all of your expenses for at least several months. Because your expenses will increase substantially with your new mortgage payment, you may need to increase your emergency savings account balance.

While it can seem intimidating to take on a new mortgage payment and other related household expenses for a second home, you may be able to more comfortably take on this additional expense when you follow these tips. You may also speak with a mortgage professional to get a quote for your new mortgage payment and interest rate. We’re here to help.

3 Easy Ways To Pay Off Your Mortgage Faster

3 Easy Ways to Put Aside a Bit of Extra Cash So You Can Pay off Your Mortgage Faster If your personal budget is similar to many others, your home mortgage payment is by far the largest expense that you pay for each month. In fact, this payment may easily account for 25 percent or more of your take-home income. Understandably, you may be focused on trying to pay this expense off early. By focusing on this payment, you can build equity and may be able to achieve financial security more quickly. You simply have to find a way to put aside a bit of extra cash regularly so that you can make extra payments, and there are few easy ways that you can consider.

Use Your Tax Refund

First, if you are one of the many taxpayers who receives a refund each year, consider setting aside some or all of this refund to reduce your outstanding mortgage balance. Some taxpayers may have such a sizable refund that it can account for two or more mortgage payments each year. However, even a few hundred dollars extra put toward your principal balance will save you a considerable amount of money in interest charges over time and will have a wonderful effect on your balance.

Earmark Your Annual Bonus

If you are lucky enough to receive an annual bonus each year, you may consider using this to pay down your principal balance. While you may usually spend this money on extra holiday gifts or just add it to your spending cash, you can benefit more substantially when you contribute it to your effort to pay down your mortgage.

Use An Automated Draft To Create a Fund

Another great idea that will work well for all individuals is to create an automated draft from your checking account each month. You may set aside the funds in a special account, and you can make an extra mortgage payment from this account periodically. Another idea is to set up auto payments for your mortgage that are higher than the amount due. For example, you may establish auto payments that are $50 or $100 more than your scheduled payments.

Paying off your mortgage earlier can be a life changing event for you. Simply imagine how different your life would be if you were not responsible for this payment each month. The fact is that this could be your reality sooner than you think if you follow these tips. For the best results, apply two or even all three tips to your efforts.

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Pitfalls And Warning Signs Of Making A Down Payment

Pitfalls And Warning Signs Of Making A Down PaymentWhen you already have a home, you may be interested in determining if a refinance is a good option. You will not have to worry about restrictions on down payments or some of the problems that can occur with a down payment.

However, if you are considering purchasing a home in or near the surrounding communities, understanding down payment restrictions is important.

Gifting Of A Down Payment

There are some programs that will allow you to use a gift for your home down payment. However, before you assume this, make sure you talk to your loan officer. Generally speaking, the lender will require the person making the gift to provide a letter stating the money was a gift and does not require repayment.

Windfalls Of A Down Payment

When people hit the lottery or come into money through an inheritance, one of the first things they may consider is buying a new home. However, it is important to keep in mind that lenders will typically want to know exactly how you came up with your down payment.

Borrowers still need to show a “trail” of how they came into money. If your down payment amount has not been “seasoned” the lender may not accept your loan.

What Is A Seasoned Down Payment?

Generally speaking, your loan officer will want a “paper trail” to document your down payment. Most lenders require down payment funds to be at a minimum six months old.

For example, let’s assume a borrower did win the lottery: If they deposit the funds into their checking account and leave it there for six months or more, the funds would be considered seasoned.

Lender restrictions on down payment funds are fairly common. If you are uncertain if your funds meet the lender’s criteria, talk to your loan officer. In most cases, a lender will require at least one-half your down payment fall into the category of seasoned funds.

Some borrowers may use their retirement account or other savings to make their home down payment.

Don’t wait until the last minute to discuss your down payment with your loan officer because you may wind up disappointed. Keep in mind, every lender has different requirements and these rules may not apply to your lender.  Call us today!