Generally speaking, most people consider a home or real estate mortgage to be “good” debt when compared to other forms of debt, like consumer and credit card debt. This is because with a mortgage the debt is secured by an asset that could be sold to (hopefully) cover the debt in full. While I’m not currently focused on paying off my mortgage with intensity, I do plan to pay it off after I’ve successfully paid off my higher interest rate debt first.
My situation is not the same as everyone’s though. My home mortgage is fairly new and was made while rates were low. I also have the advantage of having that low rate locked in for the life of my loan. This is not always the case for all mortgage owners. Interest rates used to be much higher than they are today. If you are one of the not so lucky ones, here are a couple of things to consider doing to lower your mortgage interest rate.
There are several options available if you pursue refinancing to get a better mortgage interest rate. If you’ve been paying on your home mortgage for several years and will be getting a significantly lower interest rate by refinancing, you should consider shortening your mortgage term. The shorter the term the less interest you’ll pay overall. 5 year mortgage rates are so low right now that it’s something to consider if you can afford the payments.
Take a Second Mortgage
Sometimes taking out a second mortgage on your property can be a smart decision, like if it allows you to take on some lower interest debt to pay off higher interest debt from credit cards or even a higher rate mortgage. If you decide to go this route, you might even want to consider a variable rate loan. While variable rate loans in the long term tend to be more risky than fixed rate loans, in the shorter term (3-5 years or so) these loans may be cheaper than a fixed rate loan. Shop around online to find the best mortgage rates before you decide which type of mortgage loan is best for you.
Make Extra Payments
If you aren’t interested in refinancing or restructuring your existing mortgage loan, you could always pay extra toward your mortgage each month. While this won’t get you a lower interest rate, it will save you money in the long run by paying off your mortgage early. Even knocking just a few months off the term of your loan by making extra payments can add up to significant savings if you have a high interest rate or a large loan.
What are some other ways you can think of to save money on mortgage interest?
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