Want to Save Money on Your Mortgage?

Save Money
Twenty percent of the country is having financial difficulties with job and home losses
, according to Greg Heberlein, the financial commentator at KPLU.  The news has been so focused on the difficult economic situation and in real estate on short sales, foreclosures, declining home values.

What about the other 80%? We often forget about what’s happening with the other 80% of the population.  These people need to think wisely and make some solid financial decisions. If you own a home, Greg Heberlein recommends making an additional mortgage payment each year. You can drastically cut down the time you’re paying your mortgage, PLUS save a lot of money. We’ve heard this before, but it hasn’t been mentioned in a long time.  It’s good financial advice.

Here’s a few key thoughts from his talk:

  • One payment a year can lower a 30 year fixed mortgage by as much as 8 years.
  • One payment a year can lower a 15 year fixed mortgage by almost 5 years.
  • Despite the tax deduction, you’re still better off being as debt-free as possible.
  • The last 3-6 years of a mortgage payment have such a small interest amount, it often doesn’t allow for a deduction anyway.
  • By being as debt-free as possible, it increases one’s cash flow.


Posted on September 28, 2010 at 1:49 pm
The Beaupain Team | Category: Financing, For Buyers, For Homeowners | Tagged , , ,

2 responses to “Want to Save Money on Your Mortgage?”

  1. Before someone starts making additional payments towards the principal balance of their mortgage, I would suggest they make sure they have plenty of savings set aside–perhaps 6-12 months of living expenses to cover mortgage payments and other costs in the event of a “worse case scenario”. I think it’s great to be debt free, but pay off debts without tax benefits first (credit cards, etc) and build your savings up. It’s pretty tough to get cash out of your home via a cash out refi these days–once it put it in (paying towards principal)…it’s a done deal. Should you wind up needing the cash due to an unforeseen circumstance (health or employment issue, for example) you will probably not be able to get that cash back.

    I’m not a financial advisor–I’m just a mortgage originator who see’s many home owners in need of cash–and their home is no longer an ATM between lower values and tougher guidelines–that’s not even factoring if you’ve lost your income or if it’s been reduced.

  2. Debra Sinick says:

    Rhonda,

    Thanks for your thoughts. You make some excellent points. People should have a balanced plan with some cash available for unforeseen circumstances. I like your recommendation of some cash in the bank. It makes a lot of sense to have some cash available at a moment’s notice. Life has surprised many these past few years.

    But if one can make just one extra payment a year, it can make a lot of sense over years. As a longtime homeowner, I see the difference it can make in the larger financial picture.

    It may be harder for first time buyers to do this because there are so many things a first time buyer needs to spend money on when moving into a home, like furniture and appliances. But for many, that one payment a year can make such a huge difference in overall finances.

    Since there is no commitment to the bank for the extra payment, people can also decide how each year is going, and if things are going well, make the extra payment. If things aren’t going well or big expenses are anticipated, then people can hold off.

    Of course, there is no “one size fits all” here. This will not work for everyone. I, too, am not a financial planner and would suggest people make their own decisions based on their financial situation.

    But your input was great advice! Thanks

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