Cheap Mortgages: Unique Ways To Save Money On Your Home Mortgage

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iStock_000002206210XSmall.jpg It used to be that the gold standard of investments was the family home.

With appreciation over time, in all likelihood your investment (home equity) would continue to grow.

Well, that theory went out the window when the home mortgage system fell on hard times — like the rest of the economy did.

Now, your best financial move is to find your own creative ways to save money on the home mortgage. 

In effect, cheap mortgages are easier to come by than you might think. You just need to do a few things differently…


Send In Half Of Your Mortgage Payment Twice A Month

One of the most painless ways to save some serious money on your home mortgage is to make partial payments on a (bi-weekly) paycheck schedule rather than making full payments on the regular (monthly) loan schedule.

For example, if you receive a paycheck every 2 weeks, instead of following the 12 monthly payment schedule of the loan, you will make one-half of a mortgage payment every time you get a paycheck. That’s 26 payments per year instead of 12, but each payment is for half of the amount.

This is helpful in 3 ways:

  1. You make smaller payments each time (though one extra payment each month, so it weighs out in the end)
  2. You save significantly on the amount of interest that you save each and every month, by making that second payment mid-way through the month. This is assuming your interest is calculated on the unpaid balance. The earlier you make the payment — even if it is only a half payment — will mean less of the payment goes toward interest and more goes toward the principle.
  3. At the end of the year, you will have made one extra house payment (since there are 52 weeks in the year, of which 26 of them you’ll be sending in half-payments) — since 24 half-payments would have been enough to meet your annual obligations to the loan. Those 2 extra half-payments amount to one extra full payment at the end of the year. When you include the money you’ve saved on interest each month, it’s like knocking a 30-year loan down to a 24-year loan!

To do this, you will need to contact your bank in order to arrange for such payments in advance. Some banks will only permit bi-weekly payment plans (instead of monthly) when they are made through a 3rd party service — who works directly with the bank on your behalf. Rest assured, this is quite common though. It’s not just something that people with bad credit do.


Include Your Insurance Payment In Your Mortgage Payment?

Many mortgages include the homeowners insurance right in the payment.

If that’s the case for you, by raising your deductible from say $500 to $1,000, you could save up to 25% on your annual premium.

By applying that savings directly to the mortgage payment, you will also shorten your loan and reduce your interest charges even more.

Rollover Energy Savings

Energy savings that you realize as a homeowner can also be applied toward your mortgage.

An energy audit (which you can do yourself, or hire a professional) will highlight where money is being wasted throughout your home.

For example, heat may be escaping through inefficient windows or leaky weather-stripping. Even your appliances could be using excessive energy.

By installing solar heating and/or more efficient electrical equipment, you could receive some healthy tax incentives.

Once the energy updates are accomplished and you start to realize financial savings, apply those savings to your mortgage and you’ll multiply your savings even more!

BONUS: Right now, the government is offering a tax incentive program where you can save up to $8,000 in tax credits as a homeowner. That’s a pretty sizable mortgage savings right from the start!

Budget Your Mortgage Payments

I’ve found the best way to save the most money on your home mortgage is to reassess how money, in general, is budgeted within your household.

If you always strive to pay down loans ahead of schedule, then you are in effect paying yourself.

The sooner the last payment is made, the sooner you will be free from that obligation, and the sooner you will start amassing savings.

Of course that means instead of going to the mall after you’ve paid your monthly bills with the attitude you have money left to spend, make the effort to see how far you can stretch your dollars into the next month. Little things like clipping coupons and shopping at thrift stores can become quick ways to save more cash.

Just remember, if you pay more toward your mortgage each month (with whatever you have leftover from the month before), you will quickly knock many years off the term of the loan. I know. It worked for my wife and I. Our 15-year mortgage was paid in full in 5 years!

Before you know it, you’ll be ready to host your own mortgage burning party: 


Yes, Cheap Mortgages Are Out There!

Many years ago, my mother would every so often comment on our poor cousin — this or that was happening in his life, and so on and so forth.

A number of years later, at a family reunion, I learned that my cousin and his wife had bought their house (back in the 1970’s) for $40,000. That was a sizable purchase at the time. They decided that that they would apply $10,000 of his wife’s income toward the mortgage every single year.

Guess what? They paid off their home in 4 years and have been debt-free ever since! (That was the last time they were referred to as "the poor cousins."