How to Handle Your Mortgage
Taking out a mortgage can be a scary experience. In fact, any loan can be. However, but let’s face it; your mortgage is going to be the biggest loan you are ever going to take out, so what can you do to manage it properly?
For almost everyone who purchased their own home, the mortgage payment is the biggest monthly expense. With that in mind, you should probably give some thought to it, review it, and improve on how you are managing it. Who knows, maybe reading this article can save you a lot of money in the long run.
So, let’s take a closer look at how you should be handling your mortgage.
Find out if you are paying for Private Mortgage Insurance (PMI)
PMI can increase your interest by hundreds of dollars each month, and you really do not want to be paying any more money than you have to. Especially since you can get rid of it if you play your cards right.
How to get rid of PMI
What you need to understand is that you will be paying PMI if your mortgage is over 80% of the value of your property. Therefore, increasing the value of your property (for example) might help you ditch the PMI entirely. Apart from increasing the value of your property (which can be very difficult), you can also try to decrease your mortgage by paying more each month than what they ask you to pay while following your mortgage very closely.
As soon as you get to that magical 80% – 20% ratio or better, talk to your lender and ask them to eliminate the private mortgage insurance. What you should remember is to mark any extra payments to be identified to “apply to principal” so that they change the loan balance. If you bought a fixer-upper home or a locale that became popular and rose in value, get it reappraised and go straight to your lender to remove the PMI.
Do the math, and find out what the real cost of prepaying your mortgage is
Once you have gotten your loan balance to a good enough place to remove PMI from your loan, you need to do the math and figure out if continuing to make additional payments is worth it. On the one hand, finally getting rid of a mortgage can be a ridiculously huge financial advantage for you.
On the other, you can easily come ahead if you just stick to the regular payment schedule and instead invest the extra money that in an index-fund. This is where the math comes in, and we would advise you to hire an expert. Essentially, you need to calculate how much money you would be saving if you pay off your loan early.
Explore saving through refinancing
As we have already said, consulting an expert might be a good idea. If you already have an expert, you might want to consider refinancing. Refinancing can lower your interest rate and make your mortgage payments easier to manage. However, it is not always worth it. Sometimes, the money you save over a long period from lowering the interest rate on your mortgage will simply not measure up to the amount of money refinancing may cost you in the short term. This is why you should consider talking to an expert.
Hopefully, these tips can help you sort out any problems you might have with making your mortgage payments. What you always need to keep in mind is that every single percentage point on your interest can mean thousands upon thousands of dollars in the long run as your mortgage will be with you for decades to come and you should know that every little bit helps.
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