Guest Post – Mortgage Tips and Money Saving Advice

Tom McConnon contacted me recently and wanted me to share this post with you. If you would like to contribute a guest post, you can contact me here.

If you are a first-time home buyer, a mortgage may seem like an overwhelming and intimidating thing if you do not fully understand what it is. Here we break down confusing mortgage terminology, choosing the right mortgage for your financial situation, and how to pay it off early.

Mortgage Terminology

Adjustable Rate Mortgage – Commonly referred to as an ARM in the industry, an adjustable rate mortgage is one in which the interest rate is intermittently adjusted according to a set industry index.

Annual Percentage Rate (APR) – In regards to a mortgage loan, the APR is simply the measurement of the full cost of the loan (including fees and interest) given in a yearly rate.

Mortgage Broker – A broker is an industry expert who arranges funding and negotiates mortgage contracts for clients. They are not the lender themselves but often require a fee or receive a commission.

Term – A mortgage term refers to the amount of time you have to pay off the loan, typically anywhere from 10 to 30 years. The longer you have to pay off the loan, the lower your payments will be; however, your interest rate may be higher.

Interest Rate – How much you will be paying the bank just to borrow the money. The rate is different than the actual principal (or amount) of the loan.

Closing Costs – These are fees associated with the finalizing of a mortgage. They typically include things such as an appraisal, attorney/notary fees, registry fees, etc. Closing costs are part of every mortgage.

Choosing the Right Mortgage for You

Choosing a mortgage term that is right for you depends largely on your financial situation and how you view your home. Some people opt for a longer mortgage term (such as 30 years) since it affords them lower payments. Other homeowners prefer shorter mortgage terms with larger payments so they can pay it off sooner. Traditionally, the more money you put into your home, the better off you’ll be since your home is (typically) an appreciating asset.

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Early Mortgage Payoff Tips

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Many homeowners choose to pay off their mortgage in less time than the term of the mortgage. This is especially ideal for homeowners who plan to stay in the current home indefinitely.

Pay more than the required monthly payment. Adding a specific dollar amount that goes towards your principal can really add up, even if it is only $30 a month – that’s an extra $360 a year that goes toward the loan principle. Supplement only what you can afford.

Add to your home’s value by updating or improving the rooms that will net you the most profit: the kitchen and bathrooms. This will enable you to make money if you ever sell the house.

Shave years off your mortgage term by paying 13 monthly payments each year, instead of the standard 12.

See if your lender offers biweekly payments, instead of monthly ones – make sure the fee for such a service is worth the fee it costs.

If you want to increase your financial responsibility and accountability while paying off your mortgage early, try an accelerated mortgage program, such as the Money Merge Account.

If interest rates drop, consider refinancing if you can lock in a rate that is a full 1 percent lower than your current one.