If you’re buying a home, you have to be prepared for the mortgage payments that will be added to your monthly expenses. While mortgage payments aren’t unexpected, they can be hefty and they definitely stick with you for a long time, so it’s smart to get the payments as low as possible before you even move in. To lower your payments, you need to look at the two different portions of your mortgage, the principle and the interest, and try to bring both down as low as you can.
Look Beyond Cosmetics
Getting a smaller loan is the best way to lower the amount you pay for a house because it lowers both the principle and the interest you have to pay over the life of the loan, and the best way to do this is to find a great deal on a house. One of the first things you’ll need to do when house-hunting is to stop yourself from getting focused on the cosmetic problems of a house.
Ugly carpet and a bad paint job may make a house look unpleasant, but those are cheap fixes and actually help you by bringing down the sale price. Most people want a home that’s perfect before they even get there, meaning you get the deal that they miss. With a little chunk of change at the beginning, you can easily turn the house into exactly what you want without, and you’ll be saving thousands of dollars in the process.
Bank-owned properties are often much cheaper than houses sold by the owners because the banks want them off their books and aren’t as worried about getting the best amount they can. However, because you’re working with a big corporation instead of an individual, it can take months before you even hear back from a bank about an offer you put on a foreclosed property. If you have the time and patience to buy from a bank, you can get a house at a much lower price, saving you money and giving yourself a lower mortgage payment each month.
When putting offers on houses, you have to be prepared to negotiate if you want to keep as much money in your pocket as you can. Pay attention to sale prices for similar properties, don’t be afraid to put in offers below the asking price, and be patient. There are plenty of great houses out there, and rushing into a purchase will force you to spend more than you have to, get a larger mortgage, and spend more every single month for the next thirty years. It’s just not worth it.
Put Extra Money Down
If you have the cash to spare, putting extra money towards the purchase of a home will give you a lower principle as well as a lower interest rate, which will lower the overall amount of interest you pay in two different ways. If you have cash to spare, it’s often smart to put as much of it as you can into the down payment. You may feel pinched for a little while, but in the long run it’ll be well worth it.
Get a Great Interest Rate
Because mortgage loans are for such a large amount for such a long period of time, the interest on them is huge. Even a reduction as small as ¼% can lead to thousands of dollars saved over the life of the loan, so it’s important to get the best interest rate you can. Get your credit score as high as you possibly can, and shop around with different lenders to ensure that you get the best interest rate you possibly can.
With a little bit of time and work put into your housing search, and being thoughtful about your down payment and interest rate, you can save yourself enormous amounts of money on your housing purchase, leaving you with the cash you need to do the things you want. Make the best choice for you and your family, and shop carefully so you can get yourself a great deal on a house you love with a small mortgage and a low interest rate, and you’ll find yourself happier and wealthier than you would be otherwise.
Wendy Little writes for insurance blogs. If you’re planning out your financing for a new house, use the Kanetix calculator to make your calculations.