Mortgage interest rates when going through a mortgage company in Jackson TN are one of the main factors people focus on when financing a home. All our lives, we got the advice to maintain good credit so interest rates will be good and payments will be low. Now, it’s now that cut and dry as the market changes and rates increase.
Don’t go searching for a new mortgage company yet
In spite of the odds not stacking up in your favor, you can reduce interest payments on your home. There’s one simple strategy, and it doesn’t require finding another mortgage lender and refinancing your home.
How to offset your mortgage interest rate
Over the life of your loan, you could save thousands and cut down on several years of payments. All you need to do is pay off the mortgage sooner. Whether your pay twice as much or add a few hundred dollars to your regular payment, it will cut down on the principle and reduce the overall interest you will pay.
Some use the strategy by tacking on more cash to your regular note each month. Others make bi-weekly payments to reduce the principle faster and cut into the interest.
Let’s do the math
Let’s say you have $500,000 mortgage loan with a 30 year term and 5 percent interest rate. If you pay an extra $500 each month your will satisfy the loan in almost 21 years instead of 30, which will save you $152, 900 in interest.
Things to keep in mind about offsetting your mortgage rate
- Make sure your loan promissory note has no stipulation or penalties for paying off debt early.
- Before you sign any documents with a loan officer review your budget thoroughly. The only way this method will work is if you have extra income to dump into paying off the mortgage early.
- If you can qualify, consider a shorter term loan, like a 15-year mortgage. Payments will be higher, but you will pay off the house sooner. It works for those who plan to move in a shorter timeframe than 30 years anyway.