Opening your mortgage bill and seeing how much you owe and for how long can be tough. We spoke with Scott Murray at Wells Fargo who gave us his 3 best tips:
1. Put Your Tax Refund This Year Toward Your Mortgage.
- IRS reports show that in 2013, the average American taxpayers obtained $2,755 back in taxes. By paying $1,000 – $2,000 extra each year, you will take years off of your loan. So instead of dining out or shopping this month with that refund check, use it instead to reduce your interest and shorten the length of your loan.
2. Get Serious in Your First 5 Years
- Interest accrues daily. During the first few years, most of your payments are going toward your interest and not toward the principal balance. Paying more during the first few years will help you start paying your principal balance faster. If you pay an extra $200 each month, you can pay down an extra $2,400 of the principal annually.
- *Note: When you pay extra, make sure the extra is applied to the principal balance, and not just set aside for the next payment. Also be sure to read your contract and make sure you won’t have to pay prepayment penalties.
3. Consider Refinancing
- To get the effect of a shorter-term mortgage without the risk, take out a 30-year loan, but make payments as if you had a 10- or 15-year loan. Once you figure out that this is manageable over the long-term, talk to a Loan Specialist about refinancing options.
If you’re looking to buy a home that fits your budget, or you’re ready to sell your home, consult an experienced real estate agent.
Remember: it’s not about just paying your loan down faster; it’s also how much money you can save.