New Home Mortgage Tips

If you have finally achieved the American dream of home ownership, then you have begun a grand adventure.  Once you move into your house and organize your furniture, there are some things you can do to make sure that you are able to make your monthly mortgage payment on time and without excessive stress.

Whether you have a 30 year mortgage loan, a 20 year loan, or even a bad credit mortgage loan, understanding some of the things you can do to reduce the term of the loan will help you stay there as long as you want to and avoid foreclosure.  You may even be able to lower the effective interest rate on the loan and shorten the term without having to do mortgage refinancing.

If you have a little extra money and want to make extra payments on your new home mortgage, it is especially helpful if you can do this beginning with the first mortgage payment you have.  Any little bit you pay extra will go directly to the principal, rather than the interest. Over the course of a year or so, the extras that you have included each month can actually shave years off the term of the loan.

Understanding how payments are applied on a mortgage loan or a mortgage refinance is the key to helping yourself pay less.  Even with interest rates as low as they currently are, interest is not a small part of the payment.  In fact, you often end up paying up to three times the value of the house in interest over the duration of the loan.  The way it works is through amortization.  This means that most of the interest will be paid up front with more of the principal being paid off at the end of the loan term.

You may have noticed that the first few years of a loan, only a few dollars seem to be going to the principal each month.  At the end of the loan term the reverse is true, and the bulk of the payment is going toward the principal.

Another tip is to start out making bi-monthly payments instead of only one per month.  This can shave years off of your mortgage term without you having to pay one single extra penny.  The reason for this is that when you make a monthly payment it is paying for the previous month.  When you have half of the payment going in early each month, it can really make a difference.

One more tip is to always keep at least enough money for 1 payment aside so that you will never have a late payment.