Jumbo Loans to Help You Live Larger than Life

Have you ever wondered how people can afford those million-dollar homes? Or multi-million dollar homes? Me, too. If you have ever applied for a mortgage or even looked into applying for a mortgage, you might know that getting a mortgage for around $500,000 is about the highest mortgage loans go. While that amount can buy a pretty nice house, the more expensive ones are still out of reach. If your dream home exceeds the regular mortgage limits, you might need to start looking into jumbo loans.

What Are Jumbo Loans?

In short, jumbo loans are mortgage loans that exceed the amount of money allowed by conforming home loans. These are the types of loans that you apply for if the home you wish to purchase is really high. The amounts of these two different mortgage types differ according to many things, including the area in which you hope to purchase your home.

Jumbo Loans vs Conforming Loans

There are many different types of mortgages, but these two are in reference to the size of the loans:

Regular or Conforming Loans

You have probably heard of Fannie Mae and Freddie Mac. If not, these are basically organizations sponsored by the government that have a lot of influence in the housing market. Every year, these organizations set certain guidelines that pertain to mortgages. Among other things, they set the cap on mortgage limits. If lenders provide mortgages that conform to those guidelines, aka conforming loans, then the mortgage is insured, or guaranteed by these organizations.

To simplify, Fannie Mae and Freddie Mac basically tell lenders, “As long as you meet our guidelines and do not loan more than the amount we specify, we will ensure your loans.” Most lenders choose to offer only conforming loans, as they are much less risky than non-conforming ones.

Jumbo Loans

Some lenders offer jumbo loans or loans that exceed the limits of conforming loans listed below. These are not insured by Fannie Mae or Freddie Mac, meaning that the lender assumes a lot more risk. Due to this, getting approved for jumbo loans is a much more stringent process.

Conforming Loan Limits

Infographic of jumbo loan versus conforming loan Every year, the Federal Housing Finance Agency sets forth the conforming loan limits. Typically, these limits rise with the cost of homes and often increase every year. The conforming loan limits depend a lot on the area you are looking to purchase the home, too. In most counties, the limit in 2020 is $510,400.

However, the FHFA takes into account the higher prices of homes in high-cost areas. That loan limit can be as much as 150 percent of the base loan amount. This means that some areas in America have a loan limit of up to $765,600 for 2020. Do remember that these limits are revisited yearly, so what is listed today may be totally different if you look again next January.

What Happens When You Default On Your Mortgage

These two loan types might get a little confusing if you do not understand what it means that Fannie Mae and Freddie Mac guarantees loans. Let’s simplify as much as we can. If you take out a mortgage from your bank, you will make payments to the bank. If your bank remains your creditor and you default on your mortgage, the bank has the right to take possession of your home.

Once they do that, they have to actually do something with the home or else they are still out of the money they loaned you. Instead, they will try to sell the home to make the money back. With jumbo loans, the lender is responsible for getting their own money back.

Often, though, your bank will sell your mortgage to other investors. The bank gets their money back and the investors make the interest. As long as the mortgage fits inside of the Fannie Mae and Freddie Mac limits, these organizations take over. If you default on your loan, Fannie and Freddie still get investors their money.

Think about it like this:

Let’s say you are a teenager and your parents have put a down payment on a car for you. They tell you the following: “As long as you make it home by curfew, get your chores done, take your little brother to school, and keep your grades up, we’ll pay your car payment and insurance. If you do not meet those requirements, you can pay your own bills.”

So Fannie Mae and Freddie Mac are the parents in this situation. They tell the lender, “Hey, follow these guidelines, and we will ensure you get your money back whether the borrower pays or not.” Of course, lenders are going to want their money back, so they usually stay within those limits.

Sometimes, though, they will take the risk and go outside of those limits. If they do so, though, they want to be as close to certain as possible that the borrower will actually pay them back.

Benefits of Jumbo Loans

Jumbo loans are pretty risky, but they do have a couple of good points.

Higher Mortgage Limits

The biggest benefit of jumbo loans is the amount of money you can borrow. You are not stuck within the Fannie Mae and Freddie Mac conforming loan limits, so you can purchase a higher-priced home.

One Loan

It is not unusual for a home buyer to find their dream home outside of the conforming loan limit. In fact, it happens quite often. When it does, some people choose to take out two conforming loans to cover the cost of the home. Having two separate mortgage payments to make, though, can be a hassle.

Getting one jumbo loan and spreading it out over a long time period is another option. There is something to remember here, though. The longer you pay on a mortgage, the more you pay overall in interest. If you are choosing between one jumbo loan and two conforming loans, it is important that you compare not only what the monthly payments will be, but also the total price you will pay over your entire mortgage.

Downsides to Jumbo Loans

It is important to understand the risks of jumbo loans, as well.

Higher Down Payment

Jumbo loans often require a higher down payment than conforming loans.

Higher Mortgage Limits

Yes, I know. This was listed under “Benefits”, too. Well, that’s because higher mortgage limits can be either a good thing or a bad thing. Just because you can get a higher-priced home does not mean you should. This is obviously your choice, but it is something you should carefully consider.

With any type of mortgage, you need to accept the loan you can afford, not the one the lender says you can. Think about it: you are going to be committing to this mortgage payment for a very long time. If paying $500 a month for a mortgage means you will be eating Ramen noodles every night for the next 30 years, you might want to consider a smaller loan or find a better paying job first.

Higher Interest Rates

Though this may not always be the case, it is not odd to see higher interest rates on jumbo loans since the lender is taking on so much more risk.

Qualifications

Jumbo loans are much harder to qualify for than conforming loans. Their credit, income, and debt-to-income ratio requirements are much more strict, making it hard for most people to get approved.

Higher Fees and Closing Costs

As jumbo loans are larger, they require a more in-depth qualification process, and they often require a second appraisal, you can expect to pay higher fees and closing costs, too.

How to Qualify for Jumbo Loans

Remember, jumbo loans are a lot riskier for lenders than conforming loans, so qualifying for them will be more difficult. While there is no guarantee that you will or will not be approved, there are some basics to know about what can help you qualify for jumbo loans.

Large Down Payment

Typically, lenders that offer jumbo loans want you to have a larger down payment. While a conforming residential mortgage may require less than a 5 percent down payment, jumbo loans may require anywhere from 10 to 20 percent. The lower the down payment you have, the higher of an interest rate you can expect to pay.

Great Credit Score

Conforming mortgages work with many different credit ratings, but jumbo loans usually do not. Though the requirement can vary from lender to lender, do not be surprised to find that many of them require a score well over 700.

Low Debt-to-Income Ratio

Let’s start by saying that most lenders that offer jumbo loans are going to prefer a high income. In addition to that, they are going to want to see that most of that income is free. In other words, if you make a lot of money but owe a lot of that money, your chances for approval are slim. The lower your debt-to-income ratio, the better of a chance you have.

Liquid Assets

Though this is not always true, many lenders want to see that you have money put away that can cover quite a few mortgage payments. Some call these cash reserves and others call them liquid assets. Regardless, having cash available to you that can ensure you make your mortgage payments can definitely improve your chances when applying for jumbo loans.

These assets may come in many forms. For instance, they might come in the form of a savings account. They might also come in the form of some type of investment. Anything you have to offer is worth mentioning to the lender. It might also save you some time if you take documentation of these assets with you to apply for your loan.

Extras

Every lender will have his or her own documentation requirements, but it is not odd for lenders of jumbo loans to require more paperwork than lenders of conforming loans. It is important to understand that these lenders are really putting their necks on the line to provide a loan, so it stands to reason that they want to dot every “I” and cross every “T”.

While other loans will require proof of income and other ordinary documents, lenders of jumbo loans may ask to see bank statements, W-2s or 1099s, tax returns, proof of your liquid assets, and more. Additionally, they may require an additional appraisal or inspection of the home prior to purchase. If you default on the loan and have your house foreclosed on, the lender will be stuck figuring out what to do with it. So, of course, they want to make sure the home is worth the price they are loaning you.

Shopping for a Mortgage

Shopping for a mortgage is a process, but you can make the process a little easier and more successful with these mortgage shopping tips:

Determine Your Budget First

I said it before and I will say it again: You need to know how much you can afford prior to applying for a loan- any loan. Before you even begin to look for a lender, sit down with your budget. If you do not have a budget, make one before you make another move. Be sure that your budget includes everything you pay out and purchase regularly.

Also, take into account any financial goals you have. This includes charitable donations, saving for a vacation, saving for college, buying your next car or TV, and so on. If it is a part of your financial plan, it needs to be added in.

Only after you have added up all of these totals should you see what is left for a house payment. You can always revisit your budget later if need be, but having a monthly amount in mind can help you make the best decision regarding the price of the home you purchase.

Shop Around

It is a mistake to assume that all lenders are the same. Do yourself a big favor and talk to at least three lenders that offer jumbo loans. Compare their rates, terms, and preapproval amounts. Don’t go with the first one you find, you could end up costing yourself a lot more money. If you don’t have enough time to contact different lenders, maybe you should consider taking a mortgage broker, who will find the best offer for you. Buying a house is an important part of life. It is exciting, scary, and stressful all at the same time. There are so many things that you should know when you are preparing to buy a house.

You can always count on Loanry to connect you with reputable lenders and may even make the entire process a bit easier for you. Down below, you will get a list of lenders who may give you a mortgage loan, based on the information you put in. Try it:


Do Not Rush

I know that it is really, really exciting to think about buying a home, but try not to rush the process just because you have a preapproval in hand. Remember, a mortgage is a commitment, and jumbo loans are a very big commitment. If you are going to get one, you need to be sure that you find the home you want.

Take some time to explore neighborhoods, school systems, potential employment, and so on. If a house really interests you, take time looking through it- like, really take some time. Do not just walk through it. Stop in each room and decide if it suits your needs. It is a lot easier to work hard and sacrifice for something you love year after year than it is something you do not really like. Be sure that it is worth it.

Be Prepared

While you need to take time finding your home, it is okay to hope the actual approval process would hurry. To help it out, take any documents with you when you go into apply.

Conclusion

I hope that this guide has given you a good understanding of jumbo loans and has helped you determine if getting one is the right move for you. As always, before you choose to get a loan, think it through carefully. Every financial decision requires thought and consideration as they can affect your life for years to come. Since a mortgage is a debt you will be paying on for many years to come, you want to make the best decision possible.

If you feel uncertain about taking out a mortgage, you might consider talking to a financial advisor first. A financial advisor that is not connected to the lender can take a real and unbiased look at your finances and your goals. He or she can objectively tell you how much mortgage you can afford. If you do not have a financial advisor, consider talking to a trusted family member or friend who is good with numbers.

 

Mortgage Loan Basics Spelled Out: Lending 101

Let’s talk about mortgage loan basics.

Although they are often the largest debt an individual will experience in their lifetime, mortgages are a wonderful creation. Imagine if you had to pay cash up front for any home you wished to purchase. How many bedrooms would you have in that scenario? How many square feet? If it were me, I’d probably have to forego having a roof for the first year or two until I could save up for such luxuries.

Mortgages also keep interest rates moderated. Because the property acts as natural collateral for the loan, lenders are able to be somewhat flexible with their terms. It’s not that they want to take your home, but it does give them a safety net of sorts so that they can reasonably take the risk of loaning you funds to begin with.

Get Introduce Yourself With Mortage Loan Basics

A mortgage is a loan on the property – for example, your home – which is paid back over time to the lender along with an agreed upon interest rate. What makes it different than a simple “loan” is that the lender has the right to take over the property if payments are not made. This is sometimes called having a “lien on the property.” In other words, you don’t fully own the property until the last payment is made. That’s called “paying off your mortgage.”

How Does A Mortgage Work?

Because we’re talking mortgage loan basics, let’s assume we’re talking about a home mortgage – the most common type of mortgage.

You find a home you wish to purchase. Let’s say you have $20,000 in savings, but the home is $140,000. You do some mortgage loan shopping and decide on Morty’s Mortgages. Morty is willing to loan you the full $140,000, but in return, you essentially “pledge” your house to Morty. If you miss too many payments, Morty can take your house and sell it to someone else to recoup his losses. Since you have every intention of making your payments, you decide to finance through Morty.

The thing is, you’ll be paying back more than $140,000 to Morty. How much more depends on several factors, the biggest of which is the interest rate. There are two basic types of interest on mortgages – “fixed-rate” and “adjustable rate.” Understanding the difference is Mortgage Loan Basics 101.

Fixed-rate Mortgage

A fixed-rate mortgage is one in which your interest rate remains the same for the life of the loan. The monthly payments stay pretty much the same (there are other costs besides interest, but we’ll get to those) from your first payment to your last. These are the most typical type of mortgage and sometimes simply referred to as a “traditional mortgage.” The payments are generally structured so that your early payments go towards the interest on the loan. Over time, your payments apply more and more towards the principal of the loan – the actual money you borrowed to buy your house.

You’ll sometimes hear the term “amortization” used to describe this system. I wouldn’t get too sidetracked by it; it’s pretty much the universal way things are done when it comes to mortgages. The important thing is that the amount of your monthly payment devoted to principal plus interest stays the same, even if how much of each payment goes where evolves over the life of the loan.

Awesome! But What Are the Down-side?

The only down-side to a fixed-rate (“traditional”) mortgage is that market interest rates change regularly. Daily mortgage rates fluctuate naturally, and over time they can rise or fall considerably. Either way, you’re committed to whatever it was when you first took out the home loan. If the difference is significant enough, some homeowners elect to refinance their mortgage – to essentially start from scratch, treating the balance on the mortgage as if it were a brand new home loan. Because there are other costs associated with the process, this only makes sense if the difference in what you’ll pay is substantial over time. We should cover a few more mortgage loan basics before we address refinancing.

The other type of home loan is an adjustable-rate mortgage. An adjustable-rate mortgage fluctuates with market interest rates. What determines daily mortgage rates gets a bit hairy, but basically they’re the result of three interwoven factors:

The rate set by the Federal Reserve (often simply referred to as “The Fed”).

You hear about this in the news from time to time depending on what’s going on with politics and the economy at the moment.

Investor demand for Treasury Bonds and related low-risk, low-interest investments offered and backed by the U.S. Federal Government.

When big-money individuals or institutions don’t feel good about playing the stock market or whatever else they might normally do to grow their wealth, they invest in these.

How good the banking industry is feeling at the moment.

OK, not how they’re feeling, exactly, but what they perceive to be their current risk and potential reward. This is the closest element to what we were taught in high school about “supply and demand” and the “free market” and all that.

If you really want to dive in more to these factors and how they shape mortgage rates, be my guest. I’ll be honest and tell you that the details make my head hurt and my eyes glaze over a bit, so forgive me if we move on.

Some lenders offer a “hybrid” of fixed and adjustable-rate mortgages. You’ll agree to a low, fixed interest rate for a specified length of time – say, the first five years of the loan. After that, the rate is adjustable based on market rates. The idea is that new homebuyers lock in a “grace period” of sorts at a lower rate than would be possible with a traditional fixed-rate mortgage. If you’re new to the adult world or just starting a family, the assumption is that a few years down the road you’ll be in a better position to tackle a higher house payment in exchange for that initial period of smaller payments.

Did you know?

The average US mortgage in 2017 was $202,00. Compare that to a nearly 10% increase from 2007, which was $184,000.

Other Payment Factors

Either way it’s figured, interest plus principal is the bulk of your payment each month. Those are fundamental mortgage loan basics. But they’re not all of it. Remember those other factors in the cost of the loan we mentioned above? The two most common elements packaged with your mortgage payment are insurance and taxes.

Most lenders will expect you to purchase enough insurance to cover the cost of the home in case of fire, flood, meteor shower, etc. Remember – your home is collateral for the loan, and it’s not unreasonable for the lender to expect their interests to be protected. Depending on the details of your coverage, your monthly payment can go up (or down) over time based on changing insurance rates.

The other way lenders protect themselves is by making sure you’re able to pay any property taxes associated with your home. If you don’t pay your taxes, the government might take your home and then both you and the lender are out of luck. Lenders guard against this by estimating the annual property taxes and dividing that amount by 12 months, then simply adding it to your required mortgage payment.

But Here’s the Trick:

The folks doing the estimating and the folks determining your actual property taxes each year aren’t the same folks. Besides, property taxes go up and down depending on any number of factors. That’s where your “escrow account” comes in. As you make your monthly payments, they take the amount set aside for taxes and put it into “escrow” to be paid to the government come tax time. If your escrow has too much, you’ll get a small refund. If there’s too little, you’ll get a bill asking you to add a bit. Depending on the details of your mortgage, this might increase (or decrease) your monthly payments as adjustments are made to cover those taxes.

If all of this seems a bit overwhelming, don’t panic. Many people live long, happy lives without all the big words and complex financial computations. Our goal for now is to have a better general understanding of mortgage loan basics. Honestly, just by having read this far, you already know more than most.

Whether that’s frightening or reassuring I will leave up to you.

How Can I Learn About Mortgages?

You’re off to a good start by reading this right now. You’ve probably noticed the links embedded throughout. They’ll take you to articles going into greater detail about various aspects of the mortgage process and what goes into it. You should also feel free to ask as many questions as necessary of any banks, credit unions, or online lenders you consider while mortgage loan shopping. Mortgages are what they do. If they want you as a customer, they should be willing to explain their product.

Understanding the Mortgage Process

Now that we’ve talked about some of the technical stuff, let’s step back and walk through the most likely scenario in which you’ll be utilizing your new mastery of mortgage loan basics – buying a new home.

Home Buying Step 1 – Find a Lender

I know, I know – house shopping is the fun part. Imagining what you’d do to this kitchen or how you’d utilize that den, just like on all those TV shows. But the right mortgage and mortgage provider is essential to a positive home-buying experience. Shop your options first, before you’re all giddy over the closet space. It’s easier to pay attention to things like interest rates and closing costs that way.

Home Buying Step 2 – Get Pre-Approved

You get two mortgage shopping tips on this one. First, pre-approved financing is pretty much required when buying a house. Some realtors won’t even start showing you properties until you’ve got the money lined up. And a pre-approved mortgage makes it much easier to move quickly on a home you really want. Your mortgage provider will even give you an official letter showing how much you’ve been approved for just to keep things official. This isn’t unexpected – it’s mortgage loan basics.

Second, the “pre” in “pre-approved” here doesn’t mean the financial stuff is settled and over. It merely means you have a solid indication of how much you can spend and that your lender is reasonably certain you’ll qualify to borrow that amount from them if you choose to buy a house. That’s when the real paperwork begins.

Home Buying Step 3– Look At Homes

Finally, the fun part! Don’t be that person who finds something wrong with every house, but neither should you jump at every opportunity. Make a short list of must haves, wants, dislikes, and must avoid, and do that part well ahead of time before you’re caught up in the moment. Then, refer to it as you go. Even if you modify it along the way, it will help you keep focused and remember your priorities.

Home Buying Step 4– Make An Offer

This is where a good real estate agent is so important. They can help you figure out a reasonable starting offer based on activity in the market, the area, the home itself, etc. If homes are selling quickly, it may be pointless to make an offer below asking price. At the same time, there’s usually no harm done by a little cautious negotiating. It doesn’t have to be all about the asking price, either – sometimes sellers will agree to leave the washer and dryer or replace that weird section of carpet instead of lowering their asking price.

Home Buying Step 5 – Brace Yourself (Now The Real Paperwork Begins)

If your offer is accepted, the lender will require you to complete a mortgage loan application and to submit documentation related to your income and financial history – pay stubs, W-2s, bank statements, tax returns, etc. These will be evaluated by an underwriter, whose primary function is to study the documentation provided and verify that everything is in order. There are lender requirements to be met and government guidelines to be followed and the whole thing can make your head spin a bit if you let it.

If it makes you feel any better, the underwriter is also measuring the value of the property in question and making sure it meets all sorts of requirements and guidelines as well. They may order a value assessment or other inspections if there are questions. These are all mortgage loan basics; it doesn’t mean there’s a problem.

During the underwriting process, you may be asked about events in your financial past. Where did this deposit come from? Why was this debt written off? What happened in such-and-such year that caused this change? None of this is personal – it’s just tedious. Answer as completely and honestly as you can, and keep taking deep, slow breaths. On the other hand, you may not be asked anything at all. That’s normal as well.

Once the underwriter approves everything, you are “clear to close.” Everything is sent to a title company chosen by the lender (because there haven’t been enough people involved in the process yet).

Home Buying Step 6 – The Closing

Let’s talk good news and bad news here.

The good news is that you’re almost through the paperwork/financing/questions/approval part of the home-buying process. This is the last stage of small print and legal details.

The bad news is that if this is your first closing, there’s simply no way to be prepared for the volume of papers you’re about to be asked to sign or initial. Your next lesson in mortgage loan basics? Warm up your writing hand.

While you should always pay attention to anything you’re signing, nothing presented at this stage requires major decision-making or new action on your part. The representative from the title company will explain as you go and let you know which parts you should care about. While this part is tedious, it’s not hard. Traditionally, you’ll get the keys to your new home at the end of this part. Congratulations!

Oh – one last critical detail. You will be expected to bring a certified check or something comparable with you to cover your down payment and closing costs. These often include an initial escrow deposit and various fees to pay all the different people involved in the process up to this point. Your realtor will be able to let you know exactly how much this needs to be and what’s covered, so it won’t be a surprise. They’re not the same in every situation, and sometimes the seller agrees to take on part of these expenses as part of the negotiations. All that has been settled by this point, however, and it’s time to hand over your first check and get those keys.

Home Buying Step 7– Move In

This isn’t technically part of the mortgage process, but it’s sometimes helpful to remember why you’re putting yourself through all of this. Why are you dragging yourself through mortgage loan basics? It’s all been for this moment. Try to enjoy it.

Types of Mortgages

These aren’t entirely distinct forms of mortgages so much as variations you may encounter as you begin the process. A given mortgage arrangement can involve several of these factors together, or prove so straightforward that most of this terminology never even comes up. Still, knowing some terms common in mortgage loan basics might help you ask better questions of potential lenders.

Different Interest Rates or Loan Structures:

Mortgage Loans
(See Mortgage Rates)
Fixed-Rate Mortgages

We talked about these above. With a fixed-rate mortgage, your monthly payment stays largely the same throughout the life of the loan (other than small adjustments based on changes to your taxes or insurance).

Adjustable-Rate Mortgages.

You probably remember this one as well. Most adjustable-rate mortgages start off as “hybrids” in which you commit to a lower initial interest rate for a fixed amount of time before throwing yourself on the mercies of the market.

Balloon Mortgages

Ballon Mortgages are fairly uncommon. For most of the term of the loan, you’d pay very little. Then, at the end of the time specified by the terms of the loan, the full balance would come due. This sort of mortgage only makes sense if you have unusual circumstances involving guaranteed funds down the road.

Interest-Only Mortgages

These are similar to the balloon structure above, but are structured so that the increase in payments over time is more gradual. Borrowers pay only on interest for a predetermined amount of time, then begin paying on the principal as well. These are sometimes a decent option for some first-time homebuyers just starting their careers.

Conventional vs. Government-Insured Home Loans

Conventional Loans

Those are any loans not backed by a government program like those listed below. The term doesn’t say much about the details of the loan itself; it merely indicates that you’re the one responsible for everything along the way.

Federal Housing Administration Mortgages

FHA mortgages are backed up by the government, protecting lenders in case of default. This allows lenders to offer lower down payments and better terms, although you’ll have to provide proof of appropriate insurance.

The U.S. Department of Agriculture (USDA)

It has several options for rural homebuyers who meet their requirements. They’re looking for borrowers with limited resources but who can demonstrate a predictable income, however modest. The mortgage process is handled by the Rural Housing Service (RHS), a subdivision of the USDA.

The U.S. Department of Veterans Affairs (VA)

It provides mortgage assistance to veterans or active military members and their families. As with FHA loans, the government guarantees payment to lenders in order to secure the best possible terms for borrowers. There’s also an option for no down payment, which is more common than it used to be but still unusual.

Other Government-backed Mortgages

They vary from state to state, or even region to region. There are programs to help those with Native American ancestry purchase a home, or to promote the revitalization of certain cities or parts of some states. Ask your realtor what might be available.

These are only a few of the most common variations you may encounter. Pay attention to the details. What does each mortgage option mean in terms of the total you’ll pay for your home? What does it mean for your monthly payments now, and in five years, and in fifteen years? Not to forget, what obligations are you taking on, and what can you reasonably expect from other interested parties?

It can be a bit intimidating at first, but let me offer a few mortgage shopping tips. Remember that you are the customer. In the end, you’re the person everyone else should want to be happy. Just keep your eyes open and mind focused, and don’t shy away from asking for clarification of anything you’re not quite sure about. It’s their job to make sure you know what’s going on; it’s your job to be as prepared and as upfront as possible. Know your mortgage loan basics and breathe.

Tips for Paying Off a Mortgage Faster

The first thing to do if you’re hoping to pay off your mortgage ahead of schedule is to check with your lender and make sure you understand any rules or limitations they have about such things. While you might assume any lender would be happy to have you pay more than required, or more often than required, that’s not always the case. Assuming you’ve done this, here are a few tips from homeowners who’ve done so successfully:

Figure Out Where the Extra Money is Coming From

How much could you save by taking your lunch to work instead of eating out? By cutting back on entertainment expenses and watching more movies at home? If you can’t save enough to make a dent in your house payment, try paying off credit cards or other debts at an accelerated rate. Once those are taken care of, you can apply what you’d be paying on those towards your mortgage.

Pay Biweekly Instead of Monthly

Even if you pay exactly half the amount due each month, this shaves interest over time as well as effectively paying an additional half-month’s payment each calendar year.

Pay Extra on Your Monthly Payments

Then you could request the additional amount be applied to the principal. This of course relies on the cooperation of your lender, but even a few extra hundred dollars a month on the principal of the loan can save thousands in interest over time.

Treat tax refunds, Christmas Bonuses From Work, or Any Other Unexpected Income as House Money

Apply it to your mortgage instead of using it for other things. Even if these are relatively small amounts a few times a year, the cumulative effect is substantial.

Of Course, the Best Way to Pay Off  Your Mortgage Promptly

It is to be practical about how much you spend, to begin with. If you can manage a 20-year mortgage instead of 30-years, do. If you can manage to shave that to 15-years, all the better. The best way to pay down mortgage debt is not to have as much debt!

Do you know the 2019 amount of mortgage debt in America?

The mortgage industry actually took a dip between 2008 and 2015. Then outstanding mortgages increase yet again. In January 2019, Supermoney states “American households owed a total of $9.12 trillion in mortgage debt. If you include mortgage debt from all sources, including for-profit businesses and financial institutions the total mortgage debt is $15.12 trillion.”

What is the Difference Between Mortgage Refinancing and Purchasing?

The key difference is that in one situation you already have your home and are simply restructuring how you pay for whatever’s left on the balance; in the other, you really want a house. (I know – but it’s called Mortgage Loan Basics for a reason, right?)

The Real Question is When Should You Refinance? There are Several Good Reasons:

  • Interest rates are so much lower than it’s worth the time and costs to secure the lower rates for the remainder of the loan.
  • You want to shorten the length of the mortgage so that your home will be paid more quickly.
  • It’s advantageous to change from an adjustable-rate mortgage to a fixed-rate mortgage, or the other way around.
  • You’re using your home as equity to finance a major purchase.
  • You’re consolidating your total debt and refinancing is part of that consolidation.

Refinancing isn’t free, so make sure the amount you’ll save in the long run makes the process worth it. If you’re still considering refinancing your mortgage, check out these mortgage calculators for more details to consider.

How is Mortgage Calculated?

If you’ve read this far, you have all of the pieces to your mortgage calculation. Now it’s just a matter of putting them together and seeing how altering each element changes the overall mortgage. The easiest way to do that is to take advantage of an online mortgage calculator.

Where to Shop for a Mortgage?

We thought you’d never ask.

There’s no harm trying traditional sources – your local bank or credit union or other favorite financial institution. But in the 21st century, you have numerous online options as well. That’s where we come in. We’re not trying to sell you anything or tell you what to do about your mortgage. That’s not our business. What we’re good at is connecting you to quality lender options based on the information you share with us about your needs and background. The rest is between you and them.

So, give it a try. Enter your information below and see what comes out. Maybe you will find an offer that suits your situation best.


Just between you and me, though, we’re pretty good at this. It gives us a warm fuzzy feeling of how often it works out really well for everyone concerned. It’s easy to get started and there’s no “gotcha” or hidden obligations. If you still have questions, you know where to find us.

Happy mortgage – hunting!