When people discuss their finances, they rarely include their homes. They
tend to forget that a house is just as much an investment as stocks and bonds,
and a mortgage is a financial instrument that, from time to time, needs some
fine tuning. Here are some steps to consider that will improve your home's
fiscal fitness:
Make an Extra Mortgage Payment: Paying a few dollars extra each month
can shave years off your mortgage. Not only will you own the place free and
clear sooner, you'll save a bundle in interest. Make 13 payments a year instead
of just 12 and you'll cut your loan just about in half. Even adding just $25-$50
a month can make a significant difference. Keep good records, though, and make
sure your lender credits the extra money to principal, not your escrow account.
Check Your Credit History: You never know when an opportunity to
refinance or a chance to move up to a bigger, better place might present itself,
so it's wise to keep tabs on your credit record. Mistakes often take months to
correct. But if you check your files annually with the three major credit
agencies, you can spot errors early and take care of them before they prevent
you from improving your position.
The three major credit reporting agencies to contact are:
- Equifax Credit Information Services
PO Box 740256
Atlanta GA
30374-0256
800-685-1111
www.equifax.com
- Experian
National Consumer Assistance Center
PO Box 949
Allen TX
75013-0949
800-682-7654
www.experian.com
- Trans Union National Disclosure Center
PO Box 390
Springfield
PA
19064 800-888-4213
www.tuc.com
Cancel PMI: If your downpayment was less than 20 percent of the price
of your home, you are no doubt paying for "private mortgage insurance" or "PMI"
to protect your lender in case you default. You should be able to cancel
coverage once you pay your loan down to 75-80 percent of its current value. You
may have to pay for an up-to-date appraisal to prove your home's worth, but the
savings is worth the cost. Speak with your lender for specifics.
Watch Loan Rates, House Prices: Just because you have a home doesn't
mean you should forget about mortgage rates and housing values. Even if you're
not considering a move, you should pay attention to market conditions so you
will know when it's time to consider refinancing, canceling PMI, or perhaps
selling to put your fiscal house in order.
Check Your Property Tax Assessment: The records of local tax
authorities are often riddled with misinformation. You may be living in a
4-bedroom, 2.5-bath Colonial on a quarter-acre, but the tax assessor might have
you in a 5-bedroom place with four baths on four acres. Mathematical errors are
rampant, too. If you catch a mistake, it will save you money, not just this year
but for years to come.
Check Your ARM Adjustment: If you have an adjustable rate mortgage
(ARM), be certain your lender calculates changes in your rate and/or payment in
accordance with your loan documents. Don't just take the lender's word for it.
Make sure the lender uses the correct index, and bases the shift on the index at
the proper time. Also be sure the lender adds in the proper margin. And make
sure the rules are followed regarding rounding off.
Check Your Escrow: Lenders cannot hold more than two months' worth of
extra insurance and tax payments plus $50 in escrow on your behalf. If you allow
yours to hold more, you are losing interest as well as control over part of your
finances.
Watch Your Energy Efficiency: Spending more than you should to heat
and cool your home is like burning money in your fireplace. Change your furnace
and air conditioning filters annually, and clean them every month. Also caulk
and weatherstrip around your windows, doors and other places where the outside
air can infiltrate your home's protective barrier.
Inspect Your Utility Rates: Are you paying more than necessary for
water, electricity, heat and phone service? Most utilities have a wide array of
rate plans, so be sure your rate is as low as possible.
Check Your Hazard Insurance: Annual savings may be available by
switching to a higher deductible. Also look for discounts for non-smokers, alarm
systems and proximity to police and fire departments.
