Jan. 19, 2011 -- If you want to save a lot of money (and who doesn't?), then you need to look at where you spend a lot of money. Remember that 1980s movie The Money Pit? Actually the movie wasn't very memorable at all, but I've always remembered it because it was about a house. A house in need of tons of ultra-expensive repairs. Even if your home is in good shape, it's still your most expensive undertaking. BUT it can also be your biggest source of savings. I'll say it again: if you want to save money, figure out where you spend money.
Here's a roundup of helpful websites that can help you SAVE BIG on a house when you initially buy it and then as you own it.
Buying the House for Less
Almost every state offers first-time homebuyer assistance programs that can be pretty dramatic. They may be able to help you afford a home faster, by helping with your down payment or closing costs or mortgage rate. And the funny thing is "first-time homebuyer" is defined very loosely. If you haven't owned a home in three years, many of these programs consider you a first-timer. To see a listing of programs state by state, Click here
If you live in a rural area --or would like to-- you need to know about Section 502 Loans. They are special low interest mortgages guaranteed by the US Department of Agriculture as an incentive to get people to buy in less populated area. The mortgages are called Section 502 loans or Rural Housing Guaranteed Loans. To learn more, visit the U.S. Department of Agriculture's website. Click here
Saving on Your Mortgage
If you can afford a 10, 15, or 20-year loan instead of a 30-year mortgage you will SAVE BIG. Ask lenders to run these different scenarios for you or do it yourself using an online mortgage calculator. I like the mortgage payment calculator offered by Bankrate.com. Here's a link that will take you directly to it. Click here
Do you have an adjustable rate mortgage? They are perfect for some circumstances, but beware! Banks are notorious for miscalculating adjustable-rate mortgage interest rates when they adjust. You can easily double check your bank's math --without doing any math yourself. Just go to www.Bankrate.com and click on the adjustable-rate mortgage calculator. Click here
Paying extra principal toward your mortgage is one of the most dramatic ways to save money that you will ever come across. By paying extra toward your principal, there is less principal for the bank to charge you interest on. You save thousands in interest and pay off your mortgage years early. Some people do this by paying bi-weekly which has the effect of making one extra payment a year. I prefer to send a set amount of extra money each month. A Baltimore couple who I gave a savings makeover stood to save $37,000 just by sending in an extra hundred bucks a month! It's kind of fun to plug in different prepayment numbers and time frames and see how much you can save by prepaying your mortgage. Here's a great calculator to help you do it. Click here
If you do try prepaying your mortgage as a strategy, be sure to do it in a way that your mortgage company understands. Some prefer you to write a separate check for the extra. Others do better if you always make the same size extra payment. To make sure your bank is crediting your extra payments accurately, you should print out an amortization table from the internet that shows how each extra payment affects your principal and interest, then check it whenever you get a new statement, to make sure the bank's calculations are in line with yours. Click here for a good amortization table tool.
Appeal Your Property Taxes
Another great way to save on your house while you own it is to appeal your property taxes. The time is right. Many jurisdictions are still assessing homes at pre-recession values. The key to a successful appeal is showing that homes in your area are selling for less than your assessed value or that other similar homes have lower assessments than yours. Luckily, thanks to the internet, this research is easy to do. Zillow.com tells you what your neighbors are paying for their property taxes right in the Charts and Data section.