Homeowners can easily get into a comfortable groove year after year: make monthly mortgage payments, auto-renew homeowner’s insurance, and put off upgrading to more efficient technology (such as appliances and lighting), among other things. But that groove can cost you money.
Making the minimum loan payments (while putting extra money in a low interest-bearing savings account) or keeping the same policy for years (without shopping around for more competitive rates) is an easy way to save less and spend more than you should.
The new decade is the perfect time to ditch those old moves and learn some easy, new steps that can get you closer to your financial goals in 2020.
Resolution 1: Pay down principal
Basic economics dictate that borrowers should pay off their debts with the highest interest rates first. Since mortgages today generally have low interest rates, folks with more expensive debt should tackle those big-ticket loans (like credit cards) first and then hit their mortgage.
However, if you have private mortgage insurance (PMI), you’ll want to pay down your balance as quickly as possible to the 80 percent equity level to eliminate that monthly PMI payment.
When you make extra payments toward your principal, make sure your lender knows this money should go toward your principal, otherwise they might apply it to your next month’s mortgage payment.
Some lenders have options to earmark extra funds in their payment system. If you’re unsure, check with them on how you should proceed.
Ways to prepay your mortgage:
- Apply a lump sum amount to your principal balance.
- Make extra mortgage payments every year.
- Add more money (above the minimum amount) to each payment and earmark those dollars for the principal.
- A mixture of any of these things.
Resolution 2: Refinance your mortgage
If you have an interest rate north of 4 or 5 percent and aren’t going to sell anytime soon, experts recommend considering a refinance.
There are still millions of homeowners who will likely benefit from refinancing their mortgage and locking in a lower rate.
But, before you refinance, make sure the savings outweigh the cost. Borrowers have to pay closing costs, which can range from 2 to 4 percent of the home’s value. Over time, you’ll recoup that money in savings, but many experts recommend avoiding refinances that require more than 18 months to recover the closing costs. You can use Bankrate’s mortgage finance calculator to crunch the numbers and see if this move can benefit you.
Source: by Natalie Campisi via MSN.com full article: https://www.msn.com/en-us/money/realestate/5-new-years-resolutions-every-homeowner-should-be-making/ss-BBY5XnR#image=1
About 
