When it comes to cutting your budget, you probably start with incidental expenses like eating out or having digital cable. But it’s also important to pay attention to what kind of money you can save even on the necessities, like your housing payment. You certainly can’t eliminate your mortgage altogether, but there are ways to make it cheaper for you. Here are five strategies you can use to save money on what is likely your biggest household expense.
Refinance. There are many circumstances in which it is a good idea to refinance your home, the most common being the lowering of current interest rates. Refinancing can help you save money on your mortgage payments, but make sure to use a mortgage calculator to project how much money you stand to save. This is a critical step because if you shell out more in closing costs than you would save from refinancing, it won’t be worth the deal.
Make an extra lump sum payment once a year. This can have the effect of shaving a year off of your mortgage for every 12 extra payments you make, so it’s easy to see how this helps you save money. But you can actually save even more if you coordinate your extra payment with the time period just before your interest rate is assessed for the year. This is because you can reduce your principal a little more, therefore basing your interest rate on a smaller number.
Restructure your payment plan. Instead of making just one payment each month, try switching to making a half payment every two weeks. For all practical budgeting purposes, you will still be making a payment a month, but at the end of the year, you will have made 13 complete payments instead of 12. It’s an effective way of tricking yourself into making an extra payment, even if you feel like you can’t come up with the money all at once.
Get your home reassessed. It’s not directly a savings on your mortgage, but getting your home’s value reassessed for property tax purposes can actually lower the rate that you pay. If your home’s value has gone down since the most recent assessment, you could be overpaying your property tax by hundreds of dollars.
Find out if you still need private mortgage insurance. You may have been forced to get private mortgage insurance when you purchased your home if the down payment wasn’t big enough. If this is the case for you, you can ask your lender if it’s possible to end the PMI plan if you’ve reached a certain benchmark in your payments; usually, it’s 20 percent of the cost of the home. This tip could save you more than $100 each month.