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Four Ridiculous Ways to Save Money on Your Mortgage

The most expensive monthly payment for most people is undoubtedly their mortgage. No one likes making it, but each of those payments is a check written to secure your future. After all, a home is so much more than a home. It’s an investment that, when used properly, can help you secure yourself and your family for retirement, large expenses or even to pay off credit card debt.

So, just how much can you save your on your monthly payments? Up to hundreds each month, if you play your cards right.

1. Utilize your home’s equity wisely.

Your home is more than you home. It’s an investment that, when used wisely, can help you to save on monthly payments, pay off debt faster and at a better rate, and secure your future. Paying your home off quickly is great for some, but if you’re carrying high interest credit card debt, it may not be the best choice for you.

“High interest credit card debt costs a lot more to pay off per dollar than a home does,” says INSERT NAME, a personal loan advisor at NLC Loans. “So if you’ve got, say, 15 grand in debt, it doesn’t really make sense to make extra home payments. If you’re paying a higher interest rate on your debt than you are on your mortgage, you’ll end up paying a lot more on that debt over time.”

The solution is to utilize the equity in your home to pay off your debt faster and with less accrued interest.

A cash-out refinance is a great option for those who are struggling with debt. With a cash-out, you’ll refinance your mortgage and get a cash payment for most of the equity you’ve got in your home. You can then use that cash to pay off those credit cards and roll them into your mortgage payment, which will come at a much lower interest rate. It’ll also give you the convenience of making one monthly payment and it can even increase your credit score if you had a lot of debt on those cards.

Cashing out your equity and refinancing your mortgage can even save you money on your monthly payments in many cases. Additionally, it can give you the option of getting a shorter term on your mortgage and paying it off faster—which is helpful once you’re out of debt.”

2. Make bi-weekly payments.

Paying your mortgage payment half at a time every two weeks instead of once per month is a great way to get your mortgage paid down faster. You won’t really notice the difference at all, yet doing this is equivalent to making an entire extra mortgage payment each year.

There are 52 weeks in the year, so that means if you pay bi-weekly, you’ll be making 26 total payments. Since that’s equivalent to 13 full monthly payments, you’re effectively making one extra payment while feeling no extra pinch to the wallet. That alone can knock years off your mortgage term, and the less time you spend paying off the mortgage, the less interest you’ll be paying—and the more money you will save.

Be careful, though—check with your lender before adhering to a biweekly payment schedule. Some lenders may charge a fee for this service, which could negate the effort altogether. Check to make sure the benefits don’t outweigh the cost before you commit to this plan.

3. Make an extra annual payment. Or two.

If you find that you can’t pay your mortgage biweekly, don’t fret. Instead, apply your holiday bonus, birthday money, or any other small windfall you get throughout the year to your mortgage.

A lot of people don’t understand the impact that even one extra payment could have on their mortgage term, but like paying biweekly, it really adds up over time. If you can’t make an additional payment each year, consider paying just a little bit more on your monthly payments—even as little as $50. Make sure it is paid toward your principle balance and even with those small changes, you’ll knock a couple of years—and lots of interest—off your mortgage loan.

4. Consider an ARM.

If you are currently in a fixed rate mortgage but don’t plan to live in your home for more than five years, consider switching to an Adjustable Rate Mortgage. ARMs will give you a low rate for the first five years, but after that, the rate becomes variable and matches the prime rate. If you know you’ll be house hunting in five years or less, an ARM could be for you if interest rates are currently low. This could save you hundreds of dollars per month on your mortgage payments.

If you plan on staying in your home longer than five years, this strategy can be a bit more risky. The housing market does change, and while rates might be excellent now, they may not be as low in five years—so even if you do refinance into another fixed-rate loan, you may end up with a higher interest rate at that time.