Believe it or not, (Perhaps surprisingly,) the biggest expense in buying a home isn’t always the cost of the house. Sometimes it’s the cost of your mortgage.
Over the life of the mortgage, interest can cost the homeowner as much as two times the cost of the home.
And you thought houses were expensive.
But you can manage your mortgage in ways that could literally save you tens of thousands of dollars.
The first one’s simple. Start with a competitive interest rate. Take a good close look at what’s out there. There can be over a 1% difference between rates offered by different lenders. That may not seem like much right now, but over the course of the mortgage, can really add up.
Fixed means that you know how much you’ll be paying every month, but you’ll pay a little extra for that security. Variable rate mortgages can be had at lower interest rates, but if rates jump, you need to be prepared to see monthly payments go up. Traditionally, variable rate mortgages have been more cost-effective over the life of the mortgage, but we’re currently in a low interest rate environment at the moment, and rates are likely to go up in the not-too-distant future, so it’s important to be aware of the impact rising rates could have on your payments.
So now let’s say that you’ve got your $250,000 mortgage, locked in for 5 years, at 5% interest. That has you paying $1,454.01 a month.
For the next 25 years. (In fact, things will change every time you renew your mortgage, but for the sake of simplicity, let’s stick with these numbers)
Or maybe it doesn’t have to be 25 years. What if you made accelerated weekly payments, instead of monthly? That’s $363.51 a week. And it also means that your mortgage is paid off 3 ½ years earlier. So your 25 year mortgage is now 21 years and 6 months. (By paying weekly, you’re effectively paying one extra month a year.)
One more thing you can try is to round up that weekly payment to $400 a week. The length of your mortgage just dropped to 18 years and 3 months and you reduced your interest payments by over $57,000 dollars.
The bottom line is, you need a mortgage that will give you the flexibility you need to take advantage of savings like that. That’s why Meridian offers a range of options that will allow you to save on your mortgage. Want to change to accelerated weekly or bi-weekly payments? No problem.
Or take advantage of our 20/20 program. It allows you to pay down your mortgage by up to 20% of the original mortgage balance and increase your payments by 20% each year.
We even have a Skip-A-Payment feature. Because anyone can run into unforeseen expenses, you can skip up to one monthly payment every 12 months. But in our experience, it’s a lot more gratifying to increase your payments where you can and watch that balance plummet.
Talk to us at Meridian. You could be mortgage-free and living it up sooner than you thought.