How Can I Save Money With Loan Mortgages?


Although refinancing a loan is a fairly common occurrence in today’s world, there are a lot of individuals who aren’t familiar with how refinancing works or if refinancing is right for them… if you’re one of these people, then the information that follows in this article should help you to learn more about loan refinancing and how it can possibly help you. And with the federal government of President Obama announcing a lot of loan modification and refinancing programs to help homeowners it may be hard to know what’s a legitimate refinancing deal. Is it reasonable for a mortgage lender to offer to forgive some of your principal balance when you refinance? It depends whether you’ve made your payments on time and what kinds of incentives your mortgage lender is receiving for the refinance. Look carefully at your situation and the mortgage lender you’re working with.

Although your monthly payment may be higher, you can save tens of thousands of dollars in interest charges by shopping for the shortest-term mortgage you can afford. For each $100,000 you borrow at a 7% annual percentage rate (APR), for example, you will pay over $75,000 less in interest on a 15-year fixed rate mortgage than you would on a 30-year fixed rate mortgage.

You can save thousands of dollars in interest charges by shopping for the lowest-rate mortgage with the fewest points. On a 15-year $100,000 fixed-rate mortgage, just lowering the APR from 7% to 6.5% can save you more than $5,000 in interest charges over the life of the loan, and paying two points instead of three would save you an additional $1,000.

Check the Internet or your local newspaper for mortgage rate surveys, then call several lenders for information about their rates (APRs), points, and fees. If you choose a mortgage broker, make certain to compare their offers with those of direct lenders.

Be aware that the interest rate on most adjustable rate mortgages (ARMs) can vary a great deal over the lifetime of the loan. An increase of several percentage points might raise payments by hundreds of dollars a month, so ask the lender what the highest possible monthly payment might be.

Consider refinancing your mortgage if you can get a rate that is lower than your existing mortgage rate and plan to keep the new mortgage for at least several years. Calculate precisely how much your new mortgage (including points, fees and closing costs) will cost and whether, in the long run, it will cost less than your current mortgage.

Be cautious in taking out home equity loans. The loans reduce or may even eliminate the equity that you have built up in your home. (Equity is the cash you would have if you sold your house and paid off your mortgage loans.) If you are unable to make payments on home equity loans, you could lose your home.

Compare home equity loans offered by at least four reputable lending institutions. Consider the interest rate on the loan and the annual percentage rate (APR), which includes other costs, such as origination fees, discount points, mortgage insurance, and other fees. Ask if the rate changes, and if so, how it is calculated and how frequently, as this will affect the amount of your monthly payments.

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  1. One Response to “How Can I Save Money With Loan Mortgages?”

  2. By Mary on Jan 21, 2010 | Reply

    I would like to thank you for this article. But does it really work?

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