Cool Mortgage Tips

15-Year Mortgage

Purchase or re-finance your home with a 15-year mortgage. It may not seem as cool as other things that you can do with a mortgage, but it can save you money. On a $200,000 mortgage, switching from a 30-year to a 15-year mortgage can save over $130,000 in finance charges. You also pay off your home in half the time, and build equity much faster. While is true that the payments are higher on a 15-year mortgage, most people find the increase manageable, considering the benefits.

The principal here is that you pay one half of your mortgage payment every two weeks. The savings on a bi-weekly mortgage comes from making the equivalent of an extra payment each year. A 30-year mortgage can be paid off in 23 years using this method. You can set up a bi-weekly plan yourself by depositing half of your mortgage payment into a savings account every other week. Twice a year, you will accumulate an extra half payment. Send it in, marking clearly on the payment that it is for principal only.

If you put less than 20 percent down on your home when you purchased it, you probably needed private mortgage insurance, or PMI. This insurance does not protect you personally; PMI protects the bank from a loss if you default on your loan. When your equity position is at 22 percent of the original value of your house, the lender must remove the PMI. They may do this sooner if you meet their criteria; just ask them for a review.

A good lender will review your loan application before you start shopping so that you know how much house you qualify for. This is a fairly quick process that is a good indicator of your chances for a loan approval. It is not binding on the lender. With a pre-approval, the lender takes the time to verify the application information that you provide them, If you qualify, they will give you a letter saying that you are approved for a loan of a specified amount within a certain time frame. This pre-approval gives you considerable power in negotiating with sellers.