Your home is usually the largest investment you will ever make, and with the costs of housing seemingly always on the rise, it’s vitally important to keep your eye on the rising costs of your home loan interest so you don’t end up paying double the house worth on interest costs alone.
Here are a few tips that you should consider to help decrease the expense of purchasing your new home.
Try to ensure you borrow as little as you can, the more house you buy is likely to equate to a higher price, so start with a modest home or condo and gain some equity and then when the real estate market gets hot in your neighbourhood, sell and move to a more desired home.
When it comes to saving on your mortgage, there are lots of ways to cut your interest costs, shop around for the lowest possible interest rate first. Take into consideration that your mortgage loan is repaid in regular payments — monthly, biweekly or weekly. The more frequent payments you make can save some interest costs by reducing your outstanding balance more quickly. Therefore, the more payments you make in a year, the lower the overall interest you have to pay on your mortgage.
You can also select whether an open or closed mortgage is best for you. An open mortgage is more flexible. That means that you can usually pay off part of it, or the entire amount at any time without any penalties, which may come in handy if you are planning to sell/flip your home in the near future. It can also be a good choice if you want to pay off a large sum of your mortgage loan. Most lenders let you convert an open mortgage to a closed mortgage at any time, although you may have to pay a small fee.
If you already have a mortgage and interest rates have dropped, look into renegotiating with your lender, it might be more beneficial to renegotiate. The expenses of renegotiating can generally be recuperated through lower installments within a couple of years, and you could spare countless dollars over the life of your mortgage.
It helps to shop around at renewal time too, often you can negotiate even lower interest rates when your mortgage is up for renewal.
These are just a few ways that you can diminish the expense of purchasing a home. While there isn’t much you can do about the cost of the house itself, you can certainly adjust your choices and budget to diminish that sum faster as the years go by.
Jerry Brar is a licensed mortgage broker in the provinces of British Columbia & Alberta, Canada. With many years of experience in mortgage consulting, Jerry has worked with hundreds of people to figure out which mortgage option is right for them.