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Home Loans > Home Loan Articles > Article: Tips to Minimize the Cost of Your Home Loan

Smart borrowers can reduce the total cost of their home loan and pay the balance off faster by making smart financial decisions. Making extra payments, more frequent payments, or payments that exceed the minimum amount due will decrease the total cost of the home. Borrowers can also refinance or use a credit card in conjunction with a line of credit home loan to minimize interest costs and get out of debt faster. The following money-saving tips will help you to minimize the cost of your home loan. Some of these strategies require you to remit extra money, while others simply involve making better decisions with the money you already have. Regardless, there are many ways that you can reduce the cost of your home loan and shave years off the life of your mortgage. You can also mix and match these strategies to see the best results.

Pay more than the minimum payment.

Paying extra money on your home loan will save you money over the life of the loan. Whether you remit an extra $10 or $100 each month, every little bit counts. You can also apply bonuses, cash gifts, or tax returns to your home loan payments. In any case, paying extra money will help you reduce the amount of interest you owe and enable you to repay the debt more quickly.

Make extra payments.

Paying an extra payment each year or twice a year will dramatically decrease the amount of interest paid over the life of the loan and help you pay off the debt faster. If you receive an unexpected financial windfall, consider making an extra mortgage payment or two and watch the savings roll in.

 

Pay more often.

This is a great strategy to save money on your home loan without coming up with extra income. You can save money by making breaking your monthly payment into multiple payments. Pay half of your payment every two weeks instead of once a month, or make one-fourth of your payment each week. Simply making payments fortnightly is equivalent to paying an extra month payment each year. Just make certain that you make the first split payment ahead of the payment due date to avoid a shortfall.

Inquire about on-time or early payment savings.

Some lenders offer a rebate for payments made before or on the due date. Ask your lender if they offer any incentives for early or on-time payments. To double your savings, apply the money earned for paying on time to the principle.

Keep making the same payment, even if interest rates drop.

Many people will decrease their mortgage payments when interest rates drop. If you continue making the same payment, you will reduce the amount of interest you pay over the life of the loan and pay off the debt faster.

Contemplate refinancing or switching lenders.

Borrowers can sometimes save money by refinancing their loan with a different lender. However, you must always carefully evaluate the costs of refinancing in order to ensure that you save money. Some lenders will charge you extra fees to refinance your home loan before the contract has been fulfilled. Refinancing is particularly effective if interest rates drop and you have a fixed rate home loan.

Use a credit card in conjunction with a line of credit home loan.

If you use a credit card with an interest free period to make purchases, you can apply the majority of income to your line of credit home loan. This will reduce the balance of your loan for the month, which in turn decreases the amount of money you are being charged interest on. Then, use the line of credit home loan to pay off the credit card in full. Using a credit card and a line of credit home loan in conjunction is known as "offset savings."

Smart borrowers can dramatically decrease the cost of their home loan and get out of debt faster by following these money-saving tips. Some of these suggestions, such as making extra payments, require the borrower to have extra money to apply toward his or her home loan. However, borrowers can save money by making more frequent payments or receiving discounts for paying on time without incurring any extra costs. For maximum effect, combine different tips to save even more on your home loan. Whatever strategies you choose to incorporate into your repayment plan, you will reduce the amount of interest you pay over time and can cut years off of the life of your mortgage.

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