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The purchase of a home is one of the largest expenses of your lifetime.  That is why it is so important to make the best decision possible when investing in a home. 
 
One of the first places to save money when home buying is to look for aesthetically challenged homes in a decent neighborhood.  Make sure that the home is structurally sound so that you will only need to make relatively minor renovations.  If you purchase a home where the owner has put in upgrades, you will likely end up paying more for the work the owner put in than you would have if you paid someone to do it for you. The key is to look at the area not the house itself.  If the area is appreciating you can work to bring your house to that standard and gain equity in the process.

housekeyGet the best deal on your mortgage!

The right mortgage is extremely important if you wish to build wealth.  I suggest that you avoid loans with fluctuating interest rates if you plan on staying in the house for more than 3-5 years.  If you do opt for one of these loans, then you want to make sure that you refinance that loan before the monthly payments skyrocket.
 
The best way to save your money over the life of your loan is to have a good credit standing before you apply for your loan.  If your credit history is less than perfect, you end up paying more for your house than you should.  Remember that every dollar that you spend is a dollar that can not work for you.
 
The key is to get the best rate that you possibly can by remembering these rules:
  • Pay your credit card, auto loan, and other payments on time.  If the bank sees a history of you defaulting on other payments, they may not give you any money at all.  If they do, the rate will be more than you bargained for.
  • Save up at least 3 months worth of mortgage payments in your savings.  If you can show lenders that you are able to pay the mortgage if your income ceased for 2-3 months, you are offering the lender peace of mind that you are less likely to default on the loan right away.
  • Pay down large chunks of debt before applying for a loan. This will reduce your debt to income (DTI) ratio.  The lower the ratio, the more favorable you are to the lender.  If your DTI is low, you have better chances of receiving a lower rate.
  • Know how much home you can afford.  Once you are in a position to purchase you should get pre-approved for a loan. When you speak to a qualified mortgage planner, you can have a realistic idea of how much home you can afford. The mortgage planner will carefully review your financial information and guide you to the right priced home for your budget.
  • Use a wholesale broker instead of traditional banks.  Most wholesale brokers have access to more financing options and programs than your local bank.  More financing options means more competitive rates for you as the borrower. 

Three Ways to pay off your mortgage faster

Your home mortgage is most likely your biggest monthly expense.  Each month we pay an extra hundreds of dollars in interest to our lenders in an attempt to finally pay off our home.  Here are several methods you can use to accelerate paying off your mortgage.  You can use the method(s) that best fit your financial needs.

Bi-Weekly Payments
This method of paying your mortgage early does not require any extra expenditures on your part.  You simply take your monthly payment, divide in half, and send to your lender every two weeks instead of once every month.  This method of mortgage payment is said to save homeowners between 6-8 years of mortgage payments. 
You should note that not all lenders offer this option. Some will even tack on additional fees if the borrower choses to pay their mortgage via the bi-weekly payment method.  You should make sure that your lender is actually crediting each bi-weekly payment to your loan once they receive payment, not at the end of the month once they receive the entire loan payment, otherwise, you receive no benefits.

Additional Principal Payments
Whenever you find yourself in a loan where you are paying interest on the principal balance, it is always a good idea to make additional principal payments whenever you can.  Any extra money that you allocate towards the principle balance will mean less money that you have to pay in interest.  The less interest you have to pay, the more money you will have to create wealth.
The most important rule to remember when making additional principal payments it to make sure that your lender clearly understands that your payments are meant to pay down your principle of you loan balance with the extra payments you are making.  In fact, I recommend you contact your lender before making additional payments asking them for their specific instructions on how to allocate additional principle payments. Your additional payments can be made every month, or you can make them when you have extra money in hand.

Paying down your loan using your amortization schedule
Your amortization schedule is a listing of how your total loan payments will look like during the life of your loan including your principle and interest payments you are required to pay every month. By using an online amortization generator, you can clearly see how much of each of your monthly payments is dedicated to principle and how much is dedicated to interest. The largest portion of your loan payments, especially in the early years of you loan, is dedicated to paying  interest to your lender.

Here is how you can use you amortization schedule to methodically reduce your loan duration by years and save thousands of dollars of interest in the process:   
 
1. Enter your loan amount, interest rate, and loan duration (in months) into the amortization schedule.

2. Review the amortization schedule for where you are currently in your loan payments. You can use you last monthly statement to break down your current interest, principle payment ratio.

3. Once you find out where you are on the payment schedule, find your next payment's principle amount.

4. After you have found out the process on how to make additional principle payments with your bank, send an extra payment of the next principle amount according to the schedule.

5. Sending the specific principle payment amount according to the schedule should save you the interest amount of that principle payment in the long run. 

6. As you continue pay additional principle payments according to your amortization schedule, you can shave off thousands of dollars in interest over the life of your loan and pay your mortgage off years earlier.

Note: This method is ideal for fixed rate interest payments. You may have to recalculate your payments if your interest rate adjusts.  The rapid amortization method has more impact on early years of loan payments where most of the monthly payments are allocated to interest payments.

Please consult your financial adviser or lending institution before making any final financial decisions.