Three Ways to Save on Your Home Loan

You can cut the costs of online home loans fairly easily. Here are three of the simplest and best ways to save money on your home loan.

1. Shop around for the best deal

Shop around online to find the lowest possible APR you can qualify for and negotiate with your lender to eliminate or reduce as many closing costs as you can. If you do not plan to refinance your home loan for many years and your lender gives you the option to buy points, then seize this opportunity. Online home loans that allow you to purchase points basically let you buy a lower interest rate than you would otherwise get. Also keep interest rates in mind as you shop for a home loan online. If interest rates are on the rise, lock in the current rate with a fixed-rate loan and avoid ARMs (adjustable-rate mortgages).

2. Avoid PMI (Private Mortgage Insurance)

You can avoid PMI by making a down payment of at least 20% on your home. PMI basically protects the lender in case you default on your home loan. If you make a down payment of less than 20%, you will no longer be required to pay for PMI once you have a least 20% equity in your home. Keep track of your payments in this scenario and request that your lender drop the PMI once you hit the 20% equity mark.

3. Make Bi-Weekly Mortgage Payments

Try to find online home loans that offer biweekly payment schedules. Though this may cost you an extra fee, the savings will more than pay for the fee in the long run. For example, if you take out a home loan online for $200,000 at 6.5% interest, you will pay $255,088 in interest expense. In other words, your $200,000 home will end up costing you $455,088 total. However, if you split your payment up into two payments per month, you will save more than $60,000 in interest over the life of the loan without increasing the size of your monthly payment. If you are disciplined enough, you can make biweekly payments on your own by writing a check for half of your home loan payment every two weeks. Make sure you discuss this option with your lender before taking out a home loan online and be sure that a biweekly payment program works with your cash flow. If you have any inquiries, please find your answers on the Frequently Asked Questions page.