Let's be honest. Mortgages aren't typically considered a fun thing. But when it comes to saving money on your mortgage…now that's something that will never be considered dull.
And here's the good news: there are several steps you can take to help you cut mortgage costs. From refinancing your current loan to simply shopping around for the best rate - you could be putting money back into your pocket sooner than you think.
So, whether you're a first-time buyer or someone who's looking to refinance their mortgage, here are some great ways to save money on your mortgage…
#1 Tip - Refinance Responsibly
Refinancing, which is essentially the process of paying off your current loan with a new loan - is a popular way to save money on your mortgage right now. Why? Because when you refinance, you could score a historically low interest rate.
In fact, as of October 18th 2012, the mortgage interest rate on a 30-year fixed-rate loan was 3.49 percent, according to Mortgage News Daily, an organization that provides housing news and analysis.
But there's more to refinancing than finding a low interest rate. There are also fees that you must pay, says Shah Tehrany, managing director of the private client division at Franklin First Financial.
This includes closing costs, which are miscellaneous fees charged at the closing of the loan, and could include anything from survey and inspection costs to mandated state, federal, or county fees, Tehrany says.
Add them all up and these fees may cancel out any benefits of a new loan with a lower interest rate.
Tehrany's advice: "You should be looking for the lowest interest rate you can find at the lowest cost."
#2 Tip – Shop Around and Get More Than One Quote
Getting a second opinion from another doctor is always sound advice, right?
Well, the same goes when you're shopping around for a mortgage rate. You'll want to get quotes from multiple mortgage brokers.
"There is all the difference in the world between shopping from a single broker and from two," according to a 2012 study by Susan Woodward and Robert Hall, entitled "Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence."
In fact, the average consumer could save $981 in origination fees by getting three mortgage quotes for a mortgage with a $100,000 principal, their research found.
The average savings jump to $1,393 when you get four different quotes, the study says.
Moral of the tip? Shop around…a lot.
#3 Tip - Compare Lenders on the Same Day
So, you just heard that shopping around for multiple quotes is a smart move. An even smarter, money-saving move, however, is to shop around for loans on the same day.
You always want to make sure to move fast when comparing rates, says Tehrany.
"Rates change every day so a lot of times borrowers make poor decisions because they talk to one bank one day and then a week later they'll talk to someone else," Tehrany says. "And what they don't realize is that the market may have swung tremendously."
For the most accurate comparisons, Tehrany recommends shopping for rates on the same day, or, within a 24-hour period. If not, you risk making apples to oranges comparisons, he says.
#4 Tip - Avoid Application Fees
Another way to help you cut mortgage costs is to steer clear of lenders that charge application fees.
Application fees, which typically "covers the initial costs of processing your loan request and checking your credit report," could cost anywhere from $75 to $300, according to a mortgage refinancing guide published by the Federal Reserve System, which oversees national monetary policy and the banks.
Tehrany says that applications fees could soar even higher - and if you could avoid them, you should.
"Some banks charge a $500 application fee, but if they don't do your loan for whatever reason, they won't refund your fee," Tehrany says. "That's a mistake that a lot of consumers make."
Fortunately, Tehrany says that while many banks charge application fees, there are also plenty of reputable ones that don't.
#5 Tip - When Comparing Houses, Compare Monthly Payments
Deciding between two homes with the same purchase price? One may be cheaper than you think.
And while this may sound a little crazy, hear us out: The additional hidden costs of a home are often found in taxes and insurance.
"This is where a lot of people get caught up," Tehrany says. "They know they want to buy a house for, say, $400,000 but they are not considering how property taxes and home insurance will affect their monthly payment."
For this reason, Tehrany urges consumers to look beyond the purchase price and interest rate of the loan.
"You need to understand what your monthly payment is going to be for a specific property and two very critical variables for that number are your taxes and insurance," he says.
So, when shopping around for a home, remember to look beyond the listing price and at the monthly payments instead. This could end up saving you a lot in mortgage costs in the long run.