Vanguard Properties
Kyla Brooke, Vanguard PropertiesPhone: (707) 481-0098
Email: [email protected]

3 Ways to Save on a Home Loan

by Kyla Brooke 02/17/2021

Image by Andreas Breitling from Pixabay

The vast majority of homebuyers need a mortgage in order to purchase a house, and mortgages come with significant costs because they’re such sizeable loans. While there’s no way to avoid all of the costs associated with a mortgage, there are ways to save on your home mortgage. Here are three things you can do to reduce what you pay over the course of the loan.

1. Make a Sizeable Downpayment to Avoid PMI

Private mortgage insurance (PMI) is an insurance policy that generally protects lenders in the event of a default. If there’s PMI on your mortgage and you fail to pay the loan back, the insurance will reimburse the bank for their outstanding liability. 

When this insurance is required, the homeowner pays the insurance’s premiums even though the insurance protects the bank (and not the homeowner). This is because the insurance protection is for a risk that’s directly related to the homeowner. 

Whatever premiums you pay for PMI is money that you’ll never see again. The premiums aren’t applied to your mortgage balance (even though they’re sent in with your mortgage payment), and you personally will never collect on the protection.

Thus, you should avoid PMI if at all possible. The best way to avoid the insurance and corresponding premiums is to make a sizeable downpayment at closing. In most cases, banks require homebuyers who put less than 20 percent down to purchase PMI. If you put at least 20 percent down, you probably won’t need to pay for the insurance.

2. Purchase Points at Closing

Points are an option that you can purchase at closing. In exchange for buying a point, a bank will deduct the interest rate on your mortgage slightly. Usually, one point costs $1,000 for every $100,000 borrowed and lowers the interest rate by 1 percent. 

Purchasing points at closing will cost you more up front, but they’ll drastically reduce how much interest you pay over the course of your mortgage. During a 15- or 30-year span, even a small reduction in interest yields a sizeable savings.

3. Pay Off Your Mortgage Early

Of course, paying off your mortgage early is a guaranteed way to save. You’ll no longer pay interest once your mortgage is paid off, and you’ll also have a big improvement in your month-to-month cash flow.

About the Author
Author

Kyla Brooke

Since 2005, I have been helping clients find dream homes and investment properties in the Russian River area of Sonoma County. I am also serious about affordable housing, and understand the issues related to life transitions. With Russian River Home Sales my intention is to reach out to those who wish to achieve their dream — of buying or selling a home — in the Sonoma County area.

My life’s work is about making sure that you can have the greatest quality of life possible. I am here to provide you with the professionalism and integrity needed to ensure that you feel secure in what can be a big decision in your life.

I’ve helped individuals; families, couples and investors sell and purchase properties in Sonoma County for years. Whether you’re buying, selling, investing or just doing research, you’ll need an agent who understands technology, integrity and teamwork. More importantly, you’ll want an agent who understands you and your goals. I combine this with the area’s unique market-knowledge. I have excellent negotiating skills. This enables me to team with you to get you the optimal price for any property you plan to sell or buy. 

Please feel free to use my website as a resource for all your Russian River and Wine County real estate needs. If you have any additional questions, don’t hesitate to contact me today. As a top agent in a unique market, I look forward to working with you.