Your home is one of the most important assets that you own. Typically, real estate increases in value over time and you also have the benefits and comfort of a place to call home. However, paying the monthly mortgage is something that many US homeowners worry about, especially in challenging economic times. 

Mortgages typically make up over 30% of the average US homeowner’s monthly expenses. With other necessary expenses like food and childcare costs, it can often seem impossible to save money.

Also, while you are repaying your home loan, there is still life to be lived. You may want to travel, purchase your dream car or invest in a meaningful project.

Now maybe you’ve just made your first mortgage application and are thinking ahead to figure out how you will stay on track with your payments. Or maybe you already have a home loan and are juggling your monthly payments with all your other expenses.

Either way, if you’ve ever found yourself wondering how you can possibly save more money while you pay your mortgage, read on. This article is packed with insightful tips to help you get ahead. Take note of these six money-saving strategies to set yourself up for reaching your savings goals faster, while still paying down your mortgage.

1: Set a Saving Target

It may seem simple, but many people never reach their savings goals because they never set an actual savings target. Without a clearly defined target, your savings habits are likely to be inconsistent and sporadic. The tried-and-true S.M.A.R.T. goal formula is a great way to approach planning your savings.

Specific: Determine the exact amount you want to save and what you are saving for

Measurable: Set targets and benchmarks to keep yourself accountable and on-track

Attainable: Set a goal that is doable based on your known situation

Relevant: Align your savings with goals and values that are meaningful to you

Time-Framed: Set a date for when you want to achieve your savings goal

A budget is the key to setting savings targets that are realistic and attainable for you. You can use an online app, a spreadsheet, or another budgeting tool to keep track of all your income and expenses each month. Be consistent with your budgeting – a weekly practice is ideal. You’ll know exactly where your money is going and you can curb unnecessary spending. 

Also, automate your savings as much as possible. That way, the savings amount automatically goes to its dedicated account so you are not tempted to spend it.

By setting a clear savings target, you can start taking specific, strategic steps to see that goal become a reality.

2: Extra Mortgage Payments

Many lenders have options that allow you to make additional payments on your mortgage balance, without incurring penalties. Check with your lender to see what options are available to you. 

This helps you to save by reducing your principal and lowering your monthly payments. Depending on how much you can pay, it is possible to shave a few years off the life of your mortgage. This can be a huge relief especially if you will have to make payments during your retirement years. 

If you are fortunate to receive a windfall, unexpected gift, or even a salary increase, consider applying it to your principal balance and get yourself closer to mortgage freedom.

And remember, every little bit counts. Even if you do not have a large sum or don’t get a raise at work, you can still apply any extra amounts that you save to your mortgage. Just be sure to request that the amount is paid to the principal (not the interest) and double-check whether or not you will not be charged any penalty fees.

3: Improve Your Income

Most people think of taking on more hours at work, asking for a raise, or even getting a second job. If you think you can make a fair case to your employer for a pay increase, go for it. You won’t get one if you don’t ask.  

However, there are many ways that you can earn extra income outside of your current 9 to 5 job. With a little brainstorming and creative thinking, you can add a few hundred (or a few thousand) extra dollars to your income line each month. Be sure that what you choose is something that you can manage within your current schedule. The goal is to boost your income not to become burnt out! 

Here are a few ideas to jump-start your thinking:

• Rent out extra space in your property (an extra room, garage, or storage shed)
• Teach an online class about your favorite hobby or skill (sell it on an online course platform)
• Consider dog walking, babysitting, or something you can do before or after work
• Offer tutoring in your local neighborhood (ESL, math, science, and coding are all in demand) 
• Create a blog where you can earn money through advertising 

4: Consider Mortgage Refinancing

Refinancing your home loan is another smart way to save money while you are paying your mortgage. When interest rates are low, you can see substantial savings on your monthly payments if you approach your lender to refinance your home. 

The money you shave off your monthly payments can be applied to help you reach your savings goals faster. How much sooner would an extra $100 or $200 each month get you to your target? It’s worth doing the homework to find out.

Refinancing can be a great savings strategy but it may not be applicable or advisable in all situations. Be sure to get professional guidance and consider the pros and cons of refinancing your mortgage.

Additional Read: Pros and Cons of Refinancing Your Home Mortgage Loan

5: Create Bi-Weekly Payments

Increasing the frequency of your mortgage payments is another savvy way to reduce a few years off the length of your mortgage period. Bi-weekly payments mean that instead of making 12 mortgage payments per year, you make 26 payments per year. Your mortgage payment is made every 2 weeks instead of once per month. Effectively, with this option, you would make 13 full payments over the course of 12 months.

This strategy helps to lower your principal balance faster, saving you interest costs over time. Typically, setting up bi-weekly payments is easy to do and can be started as soon as you are ready. However, it is important to speak with your lender to be clear about the details of paying your mortgage this way. You want to ensure that this strategy is a good fit for your specific situation and goals.

6: Monitor Your Expenses

As a homeowner, it is very important to keep a close watch on your expenses. Remember, achieving your savings goals will require discipline and consistent commitment. 

If you are able to negotiate a raise or land a higher-paying job, be smart about how you use your extra income. While many people often increase their expenses – buy a more expensive car for instance – it makes sense to keep your expenses at the same level and save the extra earnings.

Your budget can help you determine how much more you can realistically spend, while also ensuring that your savings goals are met.

Advantages of Saving Money While Paying Your Mortgage

Often, we are led to believe that saving while having debt is not a good idea. If the interest cost of your debt is higher than what you earn in a savings account, then it may appear that saving isn’t an advantage. However, this is not the case. 

One major advantage of building your savings as a homeowner is that you can be prepared for unexpected (and inevitable) costs. Home repairs, damages, or equipment breakdowns can all be very costly – even if you have insurance. If you find yourself needing to do upgrades to your home, this can be quite expensive also. Having some savings set aside acts as a cushion to these expenses and saves you from going further into debt with credit cards, lines of credit, or loans.

Saving while paying your mortgage also allows you to plan for other life events and goals. Vacations and travel, weddings, family reunions, or the birth of a new family member – all momentous occasions worth celebrating. Doing these with your own savings keeps your credit costs low. 

Contact the Mortgage Experts at A and N Mortgage

While it may appear to be challenging at first, lowering your mortgage payments is very possible and can set you up for greater ease and less stress in the coming years. Saving money while paying down your mortgage is doable with a little know-how and some strategic planning. 

Take note of the tips above and apply all that is relevant and helpful for your specific situation. Be sure to speak with an experienced mortgage expert to get the best advice for your unique needs. Contact the team at A and N Mortgage. They are ready to help and can even offer you a free loan quotation.