7 Practical Tips On How to Enjoy Savings When Getting a Mortgage Loan

March 28, 2021

Use these practical tips to help you enjoy savings when getting a mortgage loan.

Getting a mortgage or home loan entails a lot of research and questions. After all, it’s one of life’s biggest decisions because the loan amount and the terms that you will get will dictate the rest of your financial choices.

Practical tips to enjoy savings when getting a mortgage loan
Photo by Gabby K from Pexels

7 Practical Tips On How to Enjoy Savings When Getting a Mortgage Loan


    On the other hand, getting a mortgage loan is a decision that is worth celebrating because you are finally taking the first step in bringing your dream home to reality. While you are excited, it’s also good to delve deep into the essential facts about mortgage loans and how you can eventually enjoy savings even when you are paying your monthly amortization.

    The factors that determine the mortgage loan price


    If it’s your first time to apply for a mortgage loan, you will definitely have a lot of questions going on in your head.

    To make things simple, you just have to keep in mind four key concepts involved in determining the price of a mortgage loan: the loan amount, down payment amount, interest rates, and loan terms.

    Let’s define them quickly:

    1. Loan amount


    The loan amount is the total sum that you are interested to borrow. It follows that the bigger the amount that you are borrowing, the bigger your monthly amortization will be.

    2. Down payment


    The down payment, or what is termed by some financial institutions as the deposit, is the initial amount that you have to pay to the lender (bank, credit union or cooperative). Keep in mind that the bigger the down payment, the more that you can negotiate for lower interest rates.

    3. Interest rates


    The interest rates are the percentage charged by the lender against the total amount that you borrowed. For mortgage loans, it would also help to know if it’s add-on interest rate (rate applied to total amount then divided by the total term), nominal rate (the disclosed interest rate on which monthly loan payments are calculated, again, this is dictated by the length of the loan).

    The lower the interest rates, the lesser the monthly amount that you have to pay.

    4. Loan term 


    The loan term is the length of payment of the housing loan, usually stated in the number of months. The shorter the loan term, the lower the interest charges.

    These four factors will eventually dictate your monthly amortization or the amount that you have to pay each month.

    The monthly amortization versus your monthly income will give you an idea if you can afford the mortgage loan or not. Likewise, it will also tell where you need to adjust in terms of your finances (i.e. expenses that you can forego in favor of getting a home loan) if you do decide to go ahead with the mortgage loan.

    Lastly, remember that you should maintain a good credit history because will determine your capacity to get a mortgage loan or any other type of loan in the future. If you get a good credit score, chances are financial institutions will grant you a loan because of your credit trustworthiness.

    The different uses of housing loans


    When we think of getting a housing loan, we usually picture a house and lot. Yes, you can use a mortgage loan to buy a house and lot but it can also be used for the following purposes:

    • Purchase of a lot only
    • Purchase of a condominium unit only
    • House construction
    • Home renovation

    You can even get a credit line for renovations and refinancing using your home as collateral.

    How to save up when getting a mortgage loan


    Is it possible to get savings even when you are borrowing money for your house? Yes, it is! Here are several ways to enjoy savings on your mortgage loan:

    1. Buy a house when real estate prices are down


    Buying a property when the market price is low is perhaps the most straightforward advice that you can get on how to save up on your mortgage loan. If the market price is down, that means that the amount that you have to borrow need not be too high.

    The COVID-19 pandemic has caused real estate prices to contract. According to a report published by the Bangko Sentral ng Pilipinas, real estate prices has declined during the latter part of 2020. If you have the means, this is the best time to apply for a mortgage loan and buy a house.

    2. Get a loan when interest rates are down


    This is another practical suggestion to enjoy savings on you housing loan: borrow when interest rates are down. Simply put, when interest rates are low, your monthly amortization will also be lower.

    3. Go for shorter terms


    As I’ve mentioned above, the shorter the loan term, the lower the interest rates. That’s because a shorter term signifies that you are serious in paying off your obligation promptly. 

    4. Use a mortgage calculator


    Using a mortgage calculator would allow you to compute for your monthly amortization just by providing the total price of the house, the down payment or deposit amount, the total mortgage amount, the interest rates, and the loan terms. Once you have computed the total monthly payment, you can make a decision whether you can afford the loan or not.

    The mortgage calculator may not directly provide you with savings but it can greatly help you manage your finances. With a mortgage calculator, you significantly reduce the risk of you entering into a contract that may be burdensome to you in the long-term.

    5. Take advantage of rebates


    Some banks offer rebates or cash back if you make advance monthly payments as well as excess amortizations. It’s good to take advantage of this setup because it’s straight credit to your account.

    6. Pay via automatic debit arrangement


    Other banks also give premium for automatic debit arrangements. If you are certain that you would have a steady flow of income into your savings account, you can set this up for automatic debit arrangement to save you the hassle of remembering your monthly dues. 

    What’s more, some banks can give you preferential rates when you go for this type of arrangement because that means that you are guaranteeing them of fixed payments.

    7. Choose locked-in interest rates


    One other important aspect in mortgage loans that you have to remember is the repricing of interest rates. Yes, rates may change or get repriced versus the quoted interest rates without prior notice. This means that, depending on the market condition, it may go up or go down.

    In the end, it can affect your monthly amortization. Inquire from you bank if you have the option to lock your interest rates, provided that you are comfortable with this arrangement.

    Epilogue


    These are some practical tips that you can use to enjoy savings on your mortgage loan. This list is not exhaustive but this will give you a fairly good idea on how to make wise choices, especially for first time mortgage loan borrowers.

    PIN THIS POST
    Get savings on your mortgage loan
    Photo by Karolina Grabowska from Pexels

    This post may contain affiliate links, including those from Amazon Associates, which means that if you book or purchase anything through one of those links, we may earn a small commission but at no extra cost to you. All opinions are ours and we only promote products that we use.
    Was this article helpful?

    13 comments

    1. I'm so thankful to have found this. We are in the process of buying a home and need all the savings tips!

      ReplyDelete
    2. Thank you for this pointers. I haven't tried getting mortgage loans but i am planning to get a house loan soon. It's a big decision for me so i'm trying to save money to prepare for it and i'm making sure i am ready for it hehe
      Thank you for sharing

      ReplyDelete
    3. Mortgage loan such a headache to maintain. Thanks for sharing some valuable tips with us.

      ReplyDelete
    4. Such a great and helpful tips. This is so perfect to those who are planning to have a mortgage loan. Thank you!

      ReplyDelete
    5. Agree that it wise to invest in real estate when the prices are low. You have so many options by then and real property consultants will "fight" for the best deal for you.

      ReplyDelete
    6. These are good tips . We haven't needed a new mortgage for a while but I will keep this in mind for any vacation house in the future!

      ReplyDelete
    7. Amazing tips for those who need it! I like the way you break down your topic. I think it relieves the stress associated with mortgages when you make it accessible like this.

      ReplyDelete
    8. Great tips! I'm waiting for the real estate prices to go down. In my area prices have gone up by 200% in the last 10 years/

      ReplyDelete
    9. Great tips! It's really wise to invest on real estate while early. It's a good security in the future.

      ReplyDelete
    10. Focusing when it's down is good idea because it would save you tons of money. Great tips! Thank you for sharing!

      Fransic - https://www.querianson.com

      ReplyDelete
    11. I think it would be great to have the shorter term loan. 30 years is just too long!

      ReplyDelete
    12. Right timing! I'm in the middle of making a decision whether I'm buying, or rather starting a mortgage loan. Thanks for such an informative article!

      ReplyDelete
    13. We're due to renew next year so this is super helpful! We'll hopefully cut it down by 10 years if we invest enough!

      ReplyDelete

    Dad On The Move Comment Policy: We welcome relevant discussions on this site. Comments that are deemed spam, however, shall be deleted.