Did you purchase your home a few years back, and now find yourself looking at the remaining time on your mortgage? If so, you'll be wondering how you can save money over the years. You are not completely out of luck, even if you have a fixed-rate mortgage. Here are some ways you can save money.
Make Extra Payments
If you now have the funds available due to a promotion or new job, you can start paying more money towards your mortgage each month. This is ideal when interest rates have gone up since you secured your mortgage and you do not already have a ton of cash on hand.
The benefit of making a slightly larger payment each month is that you are going to pay off your mortgage early. You'll shave a couple years off the end of the mortgage, which will reduce how much you pay in interest.
Pay A Lump Sum
A similar option is to pay a large lump sum toward your mortgage. This should also be done when the interest rates on mortgage loans have gone up, but you have the cash on hand right now that you are willing to part with.
In addition to shaving some years off your mortgage, you'll see some immediate benefits due to paying the lump sum. While your monthly payment won't change, you'll be paying less in interest and more towards the principal from here on out. This means that if you sell your home within the next few years, you'll potentially shave hundreds or thousands of dollars worth of interest, since the principal will immediately be lower.
If interest rates have gone down since you secured your mortgage, it is worth looking into a refinance. Depending on how far you are into your current mortgage, you could see some significant savings if you know you'll stay in your home for a long time. Your mortgage will start over again, which means the mortgage will end later than before, but you can always make it up with additional payments or a lump sum later on.
You can also refinance by changing the mortgage from a 30 to a 15-year fixed-rate mortgage. The interest rate will be even lower, and having a 15-year loan means that you'll be free and clear of the mortgage faster. However, be prepared to make a large down payment that you cannot get rid of like you could if you just made extra payments.