How to Save Money on Your Home Mortgage

It is uncomplicated to save money on your home mortgage. Whether you want to save money over the entire term of the home mortgage or drop your monthly payments, mortgages offer several ways to make your life easier.
The first question is, do you want a lower monthly payment or a lower total payment? These two numbers are opposed. Interest compounds, so reducing the total amount means cutting into the principal with larger monthly payments, and dropping your monthly payment means paying off the principal more slowly and putting more money toward interest payments.
If you want a lower total payment, the solution is easy: Pay a little more each month. The extra money goes to pay off a little more of your principal, which slightly drops the amount of interest you pay next month, which means your next payment bites into your principal that much more deeply... and around and around, until within a few years you are paying markedly less interest than you were before. If you pay only $100 a month extra on a $200,000 home mortgage with a thirty year term, you will pay off the loan nine years early and save $72,000 in interest payments. If adding money every month is out of your budget, add it when you find that you have a little extra left in the bank, or make a single extra large payment once a year. The results will be dramatic.
You can pay more each month without asking permission of your home mortgage lender. However, if you want to drop your monthly payment, you will need your lenders help to refinance. To lower your monthly payment when you refinance, you will need a lower interest rate (ideally two or more points less than your current rate), and you may need to add time to your term as well. Be careful when negotiating a longer term for your home mortgage. Because of the way interest compounds, your monthly payments will not drop proportionately to the amount of time you add to the term. For example, a $100,000 home mortgage with a 5% interest rate and a 15 year term will cost $788 per month. Doubling the term more than doubles the amount of interest you will pay over the term of the loan, but drops your monthly payments by only $252, or less than a third. If your family is going through a financial rough spot, then that $252 may create enough wiggle room in your budget to see you through, and may even make it possible for you to keep your house. However, once the rough patch is over, you should consider paying extra each month to reduce the total amount you will spend on your mortgage.
Spending less on your home mortgage is simple, but it requires a tradeoff. If you want to save money in the long term, you must spend more money in the present. If you need to save money in the present, you will pay more in the long term. Decide which is best for your family, and be aware of the drawbacks as well as the benefits when you choose how to manage your home mortgage.