Did you know that buying a home can SAVE you money? Here’s how!
First, you’ll save on taxes because your home purchase will give you what will most likely be your biggest tax deduction – the interest on your mortgage. Second, you can save big on interest payments by taking advantage of little-known differences among mortgage plans. Simply put, now you can buy your dream house AND save thousands in interest and taxes. Here are a couple of ways to reduce interest payments and make your dream house a reality. Examples are based on a loan amount of $100,000 at 5% interest (5.49%APR).
- Save with a 15-year mortgage plan – Want to save over $70,000 in interest payments (and even more after-tax deductions?) Then shorten that 30-year loan term to 15 years. You will pay the loan off sooner, pay less in interest, build equity faster, and usually get a lower interest rate. On a 15-year loan, you would pay roughly $790.79 monthly for principal and interest, compared to $536.82 for a 30-year loan.
- Cut your Interest payments with a 13th payment – On a 30-year mortgage, one extra payment per year saves over $27,000 in interest and retires the loan in just over 24 years. There are two ways to make the 13th payment: One easy method is to add an amount each month equal to 1/12th of your monthly principal and interest payment (about $45 on the 30-year loan). Otherwise, you can just make one extra payment at the end of the year.
- Bi-Weekly savings strategy – Bi-weekly payment plans involve making a payment every two weeks, usually to a third party who then sends the payment to the lender. The monthly payment is divided into half and made 26 times a year. This could retire your loan in about 22 years, depending on the program, and save over $30,000 in interest.
No matter which plans you choose, make sure any extra payment is clearly labeled to go toward the loan principal. Now is a great time to buy a home. Let us know how we can help. Also, if you need to sell your current home, we have attached a great checklist to help you get your house ready for the market. And if you are looking for a great realtor, we have some awesome referral partners who can help you find exactly what you are looking for. Just give us a call!
