A mortgage is expensive.
Buying a home is one of — if not the — biggest expenses a person will ever have.
Many people are content with making the minimum payments for their mortgage, but soon realize how much it is affecting the rest of the budget.
“My wake-up call happened the first time I really looked at that end-of-year mortgage statement in the mail and realized how much interest I was paying on top of my loan,” writes Amy from Business Insider. “I promised myself right then and there that I would do whatever steps necessary to pay my mortgage off as quickly as possible.”
Make one extra payment per year
This is perhaps one of the most beneficial steps you can take to help lower your mortgage payments, according to Amy.
Even if you don’t do anything else, make just one extra principal payment every twelve months, Not only will you shave years off your loan, you’ll also save thousands of dollars in interest.
If you don’t have the cash on hand all at once, we suggest talking to your bank to find alternatives to making a one-time payment, such as sending extra payments every two weeks to spread out the impact.
Knock out PMI
Private mortgage insurance (PMI) is an additional fee tacked onto your monthly payment to protect your lender if you don’t make enough payments.
You only pay PMI if your down payment is less than 20% of your home cost, so if you’re abiding by the traditional advice that recommends putting down that 20%, you should be in the clear.
However, if you put down less, you’re probably paying this extra fee. If you’re being charged PMI you should know it, but you can also reach out to the holder of your loan to find out how much it costs.
We suggest making extra payments to get 20% equity in your home and eliminate your PMI to pay less on your mortgage every month.
However, don’t expect banks to keep track of this for you — I’ve heard stories of homeowners paying more PMI than they had to because they didn’t stay on top of it, So keep track, and call your bank when you reach that 20% equity mark.
Refinancing your mortgage means getting a new loan to pay off your old mortgage at a lower interest rate, and we suggest doing so when interest rates are low.
However, to refinance a home you have go through a round of closing costs, which is a collection of administrative fees required to process the new loan. It could be a few thousand dollars upfront, but depending on how long you stay in the home it could be worth the upfront cost.
File for property tax exemption
Some states offer tax exemption or credit on property taxes for residents. However, it depends on which state you live in, how long you’ve lived in the property, and your personal situation.
Because potential exemptions are highly specific and subject to change over time, we suggest calling your local tax commissioner or doing a quick Google to see if you’re eligible.
It varies from state to state, but property tax exemptions are more likely if you are over 65, disabled, or a veteran (in fact, Veterans Network United has a full list of veteran tax exemptions by state).