As a home owner with a mortgage, you know that the monthly mortgage payment is the largest expense every month. It is a known fact that some home owners wind up paying more than 75% over the purchase price of the home over the period of the mortgage.
But there are certain steps that you could take, not only to shorten the life of your mortgage, but also to reduce the amount of your monthly payments which would also help you in reducing the total payment of the mortgage. One thing that you must remember is that the interest and other costs associated with the mortgage make up a great part of the total of the mortgage over the time period of the mortgage.
Adding an extra payment each year. One of the ways to save on your mortgage costs is to make an extra payment each year. This extra payment is automatically applied to your principal and not your interest which reduces the balance of the loan and you would not have to pay the interest on that amount of the loan for the rest of the mortgage period.
Getting rid of your Private Mortgage Insurance. If you have been required to pay private mortgage insurance, due to a low down payment, you could request your lender to cancel the insurance once you have reduced your mortgage balance to below 80% of the homes appraised value. This will help to reduce the monthly payments as well as the total you would have to pay on the mortgage.
Resetting your mortgage. If you make a large payment towards the principal of your loan, you can ask the lender to reset your mortgage. This will work to either shorten the term of your loan or reduce the monthly payments if you choose to keep to the existing period of your mortgage.
Setting up bi-weekly payments. By setting up bi-weekly payments towards your mortgage will let you make 13 payments towards your mortgage in a year. This will mean that you will have made an extra payment which would be applied towards the principal and help in reducing the loan amount.
Refinancing. By refinancing your mortgage to a lower rate of interest you would be reducing your monthly payments which would in effect lower the amount you would pay on your total mortgage. But there are costs associated with refinancing and you would be advised to calculate whether you would save enough on your mortgage if you decide to refinance.