Question:

How to reduce your total interest cost most effectively?

Answer:

Reducing total interest cost basically depends on your lender's flexibility and your own personal discipline when devising your financial planning.

Tips on Reducing Total Interest Cost

Switching to true biweekly payment plan reduces your interest cost with thousands. Making an effective biweekly payment every two weeks not only cuts interest cost (IC), it also cuts the life of the loan with years.

Switching to shorter amortization term (with 5 or 10 years) increases your monthly mortgage payment but greatly reduces your total interest cost. Even if you are able to refinance to lower rates, consider making the high mortgage payments as you did before the refinance.

If your lender allows increase in the mortgage payment, you can significantly reduce total years and interest cost of the loan with only a 10% increase of the monthly payment.

Sometimes lenders allow up to 10 - 20% prepayment of the loan principal. If you incidentally find yourself richer - due to inheritance or tax refunds or work bonuses - consider investing or contributing the extra funds towards your mortgage balance. Even if you are able to only contribute $1000 annually towards the principal, it will result in total interest cost savings and reducing your loan amortization period.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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