How to Pay Less on Your Mortgage | Homeowner & Homebuyer Tips

Power tip to save interest is are you ready for it? It's Do you want to pay less on your mortgage? Here are some tips how you can do just that Whether you're a current homeowner looking to save interest or you're a new soon-to-be homeowner. I've got some tips for you I'm Jen. I've been loan officer for lots of years real facts. No BS here on the channel Also, make sure I hear your comments I want to hear what you think and have your questions about how you can save more money So let's talk first about if you're a current homeowner if you're in a home You can definitely always pay extra to principal to lower your overall interest rate You can pay money every month little by little and it really melts away that Interest now when you make an extra payment it goes to the end of the loan Meaning that it's going to shorten the duration if you pay on average around a full payment extra once per year Which means let's say your monthly payment with principal and interest is $1,200 if you divide that by 12, that's $100. So Essentially if you pay $100 extra a month, you could cut as much as eight to nine years off of your loan So let's not discount these small incremental changes over time You could also make a payment large chunks at a time. You can definitely do that So what this will do is it'll minimize and really reduce your overall interest Because you're accelerating your payment. So let me hear more questions down below if you have a specific question about that I want to hear from you. So now we're going to talk to people that are currently looking for a home A lot of people ask me to whether they own a home now or they're about to get into a new home Hey Jen, can I do bi-weekly payments? Yes, you can. I've got a couple words of caution I personally actually did that maybe two mortgages ago Beware that there's a charge for that So I'm bi-weekly payments the way that it works is it's a third-party company that is actually going to charge you a small fee Every time they take money out. So this third-party company is going to take out Every two weeks, they're gonna take out half of your mortgage payment. So if you do that every two weeks, there's 26 every two week payments throughout the year which is going to equate to one extra payment per year now in essence This will turn a 30-year loan into like a 22 or 21 year loan, which is amazing The thing I want you to be aware about this is that there is a fee and it's something that you could With some discipline do yourself. You could also do is say hey, I'm gonna earmark I'm gonna take one or two hundred dollars every time I make a payment I'm gonna have that come out additional and you need to when you set up your online payments You need to make sure that you say in the memo Principles so they so they allocate it to your principal balance Okay So now we're going to go on you how to save money with your interest rate if you're looking to buy another Home, whether it's your first home your 10th home Everybody wants to save money. Are you ready for it? Okay, it's called mortgage points You might hear a couple of different words your terminology. You're gonna hear mortgage points discount points Origination points. I have a secret for you. They all mean the same thing So no matter how you slice it points are up front fees paid at closing It's basically paying interest ahead of time. Let's give you an example of how that works So I'm just gonna pretend right now that you have a four hundred thousand dollar loan that that's your loan amount one point Which is 1% of the loan amount would be four thousand dollars now points don't have to be even it doesn't go one Two three, it can be something off like one point two five percent So, let's say you're paying one point two five points to buy down your interest rate that would be $5,000 you take one point two five times four hundred thousand. That's five thousand dollars one point two five Points that you pay up front at closing non-refundable. It's gonna lower your interest rate average about 0.5% So it's important to stop here It's easy to think and it's logical to think that oh, hey, I'm gonna pay one percent up front That's gonna lower my interest rate by one percent. It actually doesn't work that way So one percent is gonna lower you about a half a percent on interest or in our example One point two five percent will lower you about half a percent in interest rate Now those savings when I calculated on my mortgage calculator for a half a percent Reduction in interest rate saved about a hundred and sixty dollars a month on a four hundred thousand dollar loan So if you divide that Into the five thousand dollars that it cost me. Remember that one point two five points is $5,000 it was Equivalent to 31 what that equates to is 31 months that it's going to take to recover the 5,000 that I paid up front 31 months from now. I'll have saved that 160 a month 160 a month 160 a month To help me recover that money that I paid up front now. I want to hear your comments This is a lot of math here. Like even sometimes I get confused and I've been doing this a really long time So you pay a big chunk of money here and then you save a little bit you save 160 a month 160 a month And then you break even 31 months in this example and you just have to decide hey, is it worth it for me to do this? Do I think that interest rates are gonna maybe go down in the future before then? So if you're watching this video and you're in a high interest rate environment, you might want to think twice Because I don't know. What is that? What what what are you hearing? Are you hearing that rates possibly might go down in the future now if you are buying down from 3% Down to something in the twos or even if buying down and the rates were three or you know four percent I would say it likely would be worth it because rates probably won't get much lower than that But when the rates are higher, it's just you just want to double check and make sure It's great to ask friends your financial planner Definitely talk to your lender and see if they can give you some side-by-side information of you know, zero points, you know zero buy-down Kind of stair-step it to one maybe put put 2% buy-down on there and really compare the math to see if that's the best thing For you, but that's definitely a way to save interest Now the last one is my biggest power tip to save interest is are you ready for it? It's to increase your credit score that hands down can always guarantee that whatever the time is You're purchasing a house or refinancing you're gonna get the very best rate which could save you thousands To get the best credit score. The quickest hack that I can give you is to watch your credit cards Overspending on credit cards is like 35% of your score. It's huge So if you take your credit card balance, let's just say you have a credit card and the limit on that card is a thousand dollars You don't want to spend more than 30% or $300 in any 30-day cycle on that card This is gonna ensure that the algorithm when it calculates a score it's gonna Perceive like hey, you can go around town with a credit card in your pocket and not overspend You're probably gonna pay your bills on time. It's all about projection It's all about historical data that data shows That people that overspend and they're maxed out on their credit cards have a harder time paying their bills on time So the likelihood that you're gonna pay your mortgage late is higher if you're maxed out on your credit cards The other thing is you want to have just two to three credit cards like as a maximum now There's a big myth out there that people ask me all the time. Hey Jen I heard that if you close your credit cards, that's actually a bad thing. Well, it used to be that I have to admit Yeah, maybe like 10 15 years ago when credit scoring was first coming out But now it's super sophisticated that two to three cards is really enough to show how you pay bills when you have more than that you have the ability to be Maxed out and in debt overnight. Let's say you lost your job You'd go put everything possibly on credit cards to survive and pay your bills Then you might get behind and not be able to pay your mortgage. So that's the thought process behind that I also want to hear your questions about credit. That's a really big area of concern Of course for a lot of people let me hear your comments now You want to watch this next video about the quickest way? I go a little bit more into detail about exactly how to get that credit score up. Thanks for tuning in. Talk to you soon