Millions of Americans apply for mortgages every year, yet the long, often complex process is still shrouded in mystery for most. These are some of the most common misconceptions about mortgages. Continue reading…
Although it may sound complicated – and there can be a lot of moving parts – inheriting a property with a mortgage is actually relatively simple if there aren’t any abnormal circumstances in the mix. In most cases, if you’re bequeathed real estate that’s still secured by a mortgage, you just take over the mortgage payments or sell the property if you can’t afford it. Continue reading…
Being debt-free can feel as if a burden has been lifted off your shoulders. This is precisely why more and more Americans are looking to pay off their home mortgages as quickly as possible.
Perhaps this is easier said than done, though. According to the Federal Reserve, the combined mortgage debt outstanding for all American holders was more than $14.9 trillion in Q4 2017.1 That is one frightening number, but you don’t have to contribute to it. If you chip away at your mortgage bit by bit now, you can save yourself thousands in interest down the road.
Pay Down the Principal With Extra Funds
Your regular monthly mortgage payments go toward a combination of principal, interest, insurance and taxes. However, if you can afford to make some extra payments on the principal balance alone, you’ll pay less interest in the long run.
You can go about these payments any way you want. Maybe you create a separate mortgage pre-payment savings account and funnel a portion of your paycheck into it each pay period, or maybe you spend any extra money like gifts, tax refunds and bonuses on additional mortgage payments immediately. Whatever method you choose, make sure you specify that your payment is to be applied toward the principal only. Otherwise, your lender can divvy it up however they want.
Also make sure that you are investing in your own retirement, maintaining an emergency fund and paying off more pressing debts before making extra mortgage payments. You don’t want to run out of money in an effort to be debt-free.
Make an Extra Payment Each Year
Let’s say you don’t have a ton of extra money to pay down your principal on a whim. In that case, you may need to plan more strategically for your extra payments. There are two ways you can do this:
- Pay bi-weekly instead of monthly – By paying biweekly, you will be paying 26 times a year, which adds up to 13 monthly mortgage payments instead of 12. This may be the most realistic method for early repayment since you are less likely to miss smaller amounts of money given up at regular intervals than hundreds or thousands of dollars given up at once.
- Save up regularly for one extra payment each year – If you aren’t a fan of putting yourself on a new payment schedule, or if you’re simply nervous to part with extra funds permanently before the end of the year, consider saving monthly. To do this, you will want to divide your normal monthly payment by 12. Save that amount each month, and you will have enough for a full monthly payment by the end of the year.
Refinancing isn’t for everyone, but it may be best for your particular financial situation. By refinancing from a 30-year mortgage to a 20-, 15- or even 10-year mortgage, you can typically get a lower interest rate, which can save you money over time.
Lower interest rates may make refinancing sound like a no-brainer, but there are also some downsides to consider. Of course, cutting your mortgage repayment plan in half logically means you will have to make higher payments each month, so you must be sure your budget can accommodate this. There are also some closing costs when you refinance, since you are putting an end to your old mortgage and beginning the process all over again. You will also be paying your bills according to a new amortization schedule, which means a larger portion of your payments will go toward interest than principal at first.
Some people forego refinancing altogether and simply pay more each month as if they did refinance. This gives you the wiggle room to miss an extra payment now and then. However, this method requires quite a bit of discipline, and you won’t get a lower interest rate.
If your current house is your forever home, this won’t be feasible, but if you are looking to get rid of your debt at all costs, downsizing can do the trick. Moving into a smaller, less expensive house will drastically reduce your mortgage. In the best-case scenario, you could make enough money off the sale to pay for your new house outright!
Finance Your Home With Pinnacle Capital Mortgage
Whether you’re considering refinancing, downsizing or buying a home for the first time, the team at Pinnacle Capital Mortgage can guide you through the home loan process. We stand by our core values of partnership, service, empowerment and excellence with every client so you fully understand your options for financing your new home.
If you are ready to apply for a mortgage, you can use our mortgage advisor search to get started. You can also contact us at one of our offices in Arizona, California, New Mexico, Oregon, Utah or Washington.
The home-buying process can be confusing, especially for first-time buyers. But it’s important to understand the ins and outs of the process so you can be confident you’re receiving the best possible deal while still ending up with your dream home. It often helps when the approval process is broken up into steps, that way even first-time buyers can have a better idea of what to expect and gain a sense of what the process looks like. Continue reading…
Maybe you’ve heard about the benefits of refinancing your mortgage to take advantage of the currently low interest rates. Does that mean it’s a good time to refinance for your situation? That all depends on a variety of factors. In general, there are a handful of reasons you may want to refinance, such as you wish to take advantage of lower interest rates or secure other debts. However, each reason and method of refinancing often comes with some pros and cons homeowners should be aware of, which will ultimately help determine if now is the right time to refinance. Continue reading…
A reverse mortgage is a type of loan available to certain homeowners, usually those who are 62 years of age or older and only if they own their home outright or have significant equity in their current home. As its name suggests, it works in reverse fashion than that of a normal mortgage. Essentially, if you have home equity, you can “cash in” your equity and receive money from your lender by using your home as collateral. Continue reading…