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5 Ways To Reduce Your Mortgage When Buying Your Home

Aug 17, 2007
Just about everyone takes pride in the home they bought - especially is this true when you know you have the best deal around. If you are looking to find a way to finance your new home, then there are a number of things you can do in order to save some serious money and reduce your monthly mortgage payments. Here are some tips about how to reduce your mortgage when buying your home.

1. Compare Mortgage Offers

This is probably one of the greatest ways that a lot of money can be saved. Instead of assuming that a single lender is offering you the best deal, it will benefit you greatly if you compare a number of offers from different lending agencies (banks and mortgage brokers). By making informed choices, and asking questions about the various fees and terms, you can wisely choose the best deal for your situation. This simple procedure could save you thousands of dollars each year.

You also want to learn about the various kinds of mortgages that you can get. Depending again on your situation, and how long you intend to stay in your house, different types of mortgages may be available to save you money if you are not intending to stay for many years. This could include balloon mortgages, interest only mortgages, and possibly assumable mortgages.

2. Make A Larger Downpayment

The amount of money that you put down on your mortgage determines the amount of interest and type of deal that you can get. Obviously, then, it only makes sense to put down more, if you are able, and this will allow you to reduce your interest rate, and monthly payment, too.

3. Avoid Private Mortgage Insurance (PMI)

While this may not be possible for everyone, it is certainly something that you want to think about. This point really goes along with the above thought. In most cases, a lender will require you to get PMI if you are putting down less than 20%. A lender looks for those that are borrowing 80% or less of the value of the house and will give to them the best deals. PMI can be avoided if you put down 20% or more of the value of the house.

4. Get A Package Deal

Here is an alternative way to reduce our mortgage, not have to pay PMI and save money on taxes, too. By getting a piggyback mortgage package, you can reduce your mortgage and save a lot of money. If, for example, a home costs $225,000, then a package deal could involve paying down 10% ($23,000), getting a first mortgage for $180,000, and a second mortgage for the balance of $22,000.

Because the first mortgage is equal to or less than 80% of the house's value, PMI is not necessary. A second mortgage, can also be tax deductible - depending on the particular arrangement you get and how it is used.

5. Get Longer Terms

This feature is more of a trade-off than anything. Mortgages these days now offer extended time frames beyond the normal 30-year period. This means that you can now get a mortgage on your new house for 40 or even 50 years. It is a trade-off because, while it definitely will lower your monthly payment, it will add to the amount of interest that you are paying. So, while it gives you a reduced payment - which may be what you are looking for at the present time, it also will tend to keep you in debt longer.
About the Author
Joe Kenny writes for the Loans Store, offering re mortgages offers, or view the latest adverse credit remortgage at NationsFinance.co.uk.
Visit today: http://www.ukpersonalloanstore.co.uk/
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