While the amount of money you get from a lender as you take out a home loan can seem huge, when you think about how much you’ll actually be paying back to that lender over the life of your loan, the total cost can seem astronomical. Especially if you don’t get a very favorable interest rate, you can end up paying more in interest than what you paid for the actual piece of property.
So to help you save money and be less beholden to your lender, it’s generally wise to pay off your debt as soon as possible so that you’re paying less interest. To help you see how this can be done, here are three ways to pay less interest overall on your home loan.
Get The Lowest Possible Interest Rate
The first thing you should think about when trying to pay less interest is what your actual interest rate is. Ideally, you should try to get the lowest possible interest rate when you take out your home loan.
There are multiple ways that you can do this. First off, you should try to shop around for the lowest possible rate offered to you when applying for a mortgage. This might include getting a mortgage that also has an offset account or that you pay points into now in order to lower the rate. Later on, Tim Plaehn, a contributor to SFGate.com, shares that you can refinance your home loan if a lower rate is available to you.
Pay More Than Your Monthly Payment
With whatever your current interest rate is, one way you can pay less interest without actually changing your rate is to simply pay more on your home loan that you’re required to.
As you do this, Teresa Mears, Ben Luthi, and Jeff Brown, contributors to U.S. News and World Report, share that you can shave years off of your home loan and save yourself thousands of dollars in interest. Even by paying just a small amount more, like an extra $100 each time you make a mortgage payment, you can see a huge difference in the overall cost to you.
Consider A Shorter Term For Your Loan
Another way you can pay less interest on your home loan is to get a home loan that has a shorter term for repaying that loan.
According to Max Fay, a contributor to Debt.org, getting a 15-year loan as opposed to a more traditional 30-year loan means you’ll usually get a more competitive interest rate to pay in addition to paying the loan off in half the time. While your actual monthly payment may be higher, you’ll likely pay a lot less with a 15-year loan than you would have with a 30-year loan on multiple fronts.
If you’re wanting to pay the least amount of interest as you possibly can on your home loan, consider using the tips mentioned above to show you how to make this happen.