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Creative Ways On How To Reduce Your Mortgage
By Steve Chang
Your monthly mortgage payment is most likely your biggest monthly expense.  And in most cases, you end up paying double for what the home is actually worth at the end of your loan program.  Knowing some tricks on how to reduce your mortgage payments can give your finances a break.  Below are some tricks you can use.
One Extra Mortgage Payment a Year.  Interest on the purchase price of the home is compounded, meaning the quicker you pay down the principal, the less interest you have to pay.  If you pay less interest, then you are paying less for your home.  Assume you have a conventional 30 year mortgage.  If you make one extra mortgage payment every year, then you can potentially knock off 10 years of mortgage payments.  For example, if your monthly payments are $2,000 a month, make an extra $2,000 every December.  Instead of paying $2,000 for 30 years, you will have to $2,000 for 20 years.  The extra $2,000 will be applied towards the principal amount that you owe – meaning the interest calculated will be less the following year.
Refinance to a lower rate.  Refinancing can be a nightmare.  Most people fear the extra costs of refinancing.  However, if you can find a lower rate that will save you money in the long run, I don’t see why it should stop you.  Remember, the interest on the 30 year conventional loans are compounding.  If you can lower your interest rate by 1%, the savings from refinancing may well exceed the costs of refinancing.

In Debt?  Consolidate.  If your debt is incurring interest, such as credit cards or car loans, try refinancing your home by doing a cash-out refinance.  A cash-out refinance is when you refinance your mortgage while taking out the equity.  For instance, your loan is $100,000 but the market value of your home is $200,000.  You can refinance your home and take out almost $100,000.  Your loan value (as well as the monthly mortgage) will be higher because it will now be based on $200,000; BUT you can use the $100,000 to pay off your high interest credit cards, car loans, or any other debt that is incurring interest.
The advantage of doing this is found when you do your taxes.  The interest you pay on your home is tax deductible.  When you do a cash-out refinance to pay off your car loans and credit card bills, you have essentially “converted” your non-tax deductible interest bearing loans into a tax deductible loan.
The disadvantage of taking the equity out of your home, of course, is the higher mortgage payment.  The higher payments, however, are offset by the zero payments you are now making with your other debts.
Since your home mortgage is the largest bill you have to pay every month, it is wise to see how you can reduce it, whether it is in your monthly payments or in the terms of the loan.  You will need to pick which option works best with your current financial situation.   

Is your loan program right for you? Find out by visiting www.gurucs.com/mortgage for more home mortgage articles.

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