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Three ways to save money on your mortgage

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Posted: Friday, March 29, 2013 9:31 am

Paying off the mortgage early is in. Refinancing to take money out of our homes is out. Living through the foreclosure crisis, more people want the security and the emotional benefit of owning their home free and clear. Many financial experts claim the benefits but few explain the details. Here’s a few to consider.

1. Just pay more: If you want to see magic, start playing with mortgage calculators and see how adding a little payment to your principal here and there can shorten the length of your loan. Did you know that adding just a meager $6 a month on a $200,000, 30-year loan can save you four payments at the end of the mortgage loan? Pretty amazing!

2. Refinance with a shorter-term mortgage: You can refinance into a mortgage for 10, 15 or 20 years. 15-year mortgages are the most common. One advantage of a shorter term loan is that you're committed to the higher payment. There's no wavering about whether you can afford to pay extra this month. With a 30-year, $100,000 loan at five percent, your principal and interest payments are $537. With a 15-year payoff schedule, your principal and interest payments are $791. To get the effect of a shorter-term mortgage without the risk, take out a 30-year loan, but make payments as if you had a 15-year loan.

3. Switch to biweekly payments: Biweekly payments take advantage of the fact that there are 52 weeks in the year. If you pay half your regular mortgage payment every other week, you'll have made 26 half-payments, or the equivalent of 13 full monthly payments, at year's end. The extra annual payment can chop about six years off a 30-year mortgage.

These are just a few strategies that might help shave a little time and money off a mortgage. Some are a little less painful than others. As with any financial advice please be sure to read your contract and make sure you won't have to pay prepayment penalties, additional bank fees, etc., before you make extra payments. Also, be sure to ask the bank to credit extra payments toward principal so you save more on interest expense.

Sheri Aguilar is the president of the Lodi Association of Realtors and can be reached at