Owning a home is one of those big dreams in life. Benefits are everywhere – this is the place to name your own tax benefits. It’s also probably the biggest investment you’ll ever make, and it seems like those monthly mortgage payments will never run out (thanks interest).
It may seem that this is not the case, but a faster mortgage payment is not only possible, but also has some important advantages. “It can allow you to spend that money on other things in your home, like major renovations, and it will allow you to start saving money for long-term goals like retirement,” says Nancy Almodovar, President and CEO Nan and company properties… Another advantage: you will save all the money on interest in the long run.
With smart financial strategies up your sleeve and services from professionals in Bank of RegionsAs one of the nation’s largest full-service providers of consumer banking, wealth management, and mortgage products and services, you can start to push that sky-high value closer to zero.
Increase your monthly payments.
“If you can increase your monthly mortgage payments, you will shorten the loan term and be able to acquire capital faster,” says Almodovar. For example, according to Regions Bank experts, if you add $ 50 a month to a 30-year, fixed-rate loan of $ 200,000 at six percent, it will shorten the term by three years and save you more than $ 27,000 in interest.
Almodovar advises to keep in mind that if you are paying more than the required monthly payment, you should alert your mortgage company. “Tell your mortgage company to use that extra money to pay off the principal of your mortgage debt,” she explains. “Otherwise, they might just credit it for next month’s payment, which means your extra money will go towards paying off the principal as well as interest, so the principal won’t be paid off as quickly.” The Bank of Regions has a convenient mortgage calculator it can help you figure out how much time you can cut from the mortgage loan period.
Schedule additional payments.
Perhaps monthly increases in mortgage payments are simply unrealistic for your budget or lifestyle. In this case, you may want to consider making additional payments here and there throughout the year, depending on the cash flow you have (for example, from a bonus for a job or your tax return). Again, if you really go this route, be sure to talk to your lender. You need to indicate that the additional funds must go exclusively to the principal amount of your mortgage – otherwise, they can only use to pay interest.
Consider refinancing your mortgage.
“Interest rates on historical minimum,– says Almodovar, so maybe it’s time to think about refinancing your mortgage. To reduce monthly payments, many borrowers choose a longer term (usually 30 years) to repay the borrowed funds. But over the years, you may find that you earn more, have additional cash flow at your disposal, or want to take advantage of lower interest rates. In this case, you may want to consider refinancing your mortgage loan.
If interest rates are falling and you just want to lower your monthly payment, you can refinance for the same term. Alternatively, refinancing for a shorter period will increase your monthly payments, but in the end you will pay less interest. Keep in mind that when you refinance a mortgage, you are essentially replacing your existing mortgage with a new one, which means there are fees associated with the transaction, including title insurance, escrow fees, lender fees, appraisal fees, and more. According to experts at Regions Bank, this can usually cost anywhere from three to six percent of your outstanding loan.
A good rule of thumb: if you can lower the rate by two percentage points, then refinancing may be in your best interest. The Bank of Regions can help you figure out if it’s worth it tool, and allow you to compare loan terms using this is calculator.
Consider another type of loan.
Whether you are buying your first home or refinancing an existing one, there are two main mortgage options to choose from: a fixed rate mortgage or an adjustable rate mortgage.
BUT fixed rate mortgage charges the same interest rate for the entire term of the loan. The advantage of a fixed rate mortgage is that the borrower is protected from higher interest rates, which can increase monthly payments. However, when interest rates are higher, it can be more difficult to get a loan because the monthly payments are higher.
An adjustable rate mortgage (ARM) this is where rates can fluctuate. Payments are usually based on a set rate for a specific period of time – often three or five years – after which the rate (and monthly payment) may change. According to Regions Bank, ARM can be beneficial if you know you won’t be staying at home for long, or just until the end of your flat rate period.
To find the mortgage solution that works best for your family, visit Regions.com/mortgage for advice and tools, or make an appointment with one of their professionals today. This article is sponsored by Regions Bank, an FDIC member, Equal Housing Lender.
This content is created and maintained by a third party and imported into this page to help users provide their email addresses. You can find more information about this and similar content at piano.io.