It is uncomplicated to save money on your home mortgage. Whether you want to save money over the entire term of the home mortgage or drop your monthly payments, mortgages offer several ways to make your life easier.
The first decision you have to make is, do you want to reduce your total payment or your monthly payment? These two numbers are opposed. Interest compounds, so reducing the total amount means cutting into the principal with larger monthly payments, and dropping your monthly payment means paying off the principal more slowly and putting more money toward interest payments.
If you want to save money by lowering your total payment, the answer is simple: Add a little extra to your monthly payments. The extra money goes to pay off a little more of your principal, which slightly drops the amount of interest you pay next month, which means your next payment bites into your principal that much more deeply... and around and around, until within a few years you are paying markedly less interest than you were before. Adding just $100 a month to the mortgage payments for a $200,000 home mortgage with a 30 year term can strip nine years off the duration of the loan and save you over $72,000 in interest payments. If you cannot add money every month, add it when you can, or make one large extra payment a year. The results will be dramatic.
You can pay more each month without asking permission of your home mortgage lender. However, if you want to drop your monthly payment, you will need your lenders help to refinance. When you refinance, your goal is a lower interest rate (at least two points lower than your current rate, and ideally much lower), and probably a longer term. Be careful when negotiating a longer term for your home mortgage. Because of the way interest compounds, your monthly payments will not drop proportionately to the amount of time you add to the term. For example, a $100,000 home mortgage with a 5% interest rate and a 15 year term will cost $788 per month. Increasing the term to 30 years decreases the monthly payment by only $252 and more than doubles the total amount of interest you will pay. If your family is strapped financially, then this is a significant savings for your monthly budget, and may even enable you to keep your home. However, once you are less strapped, it makes good financial sense to pay a little extra each month to decrease the total sum you will owe on your mortgage.
As you can see, saving money on your home mortgage is easy, but requires tradeoffs. If you want to save in the long term, you must spend in the present, and vice versa. Decide which is best for your family, and be aware of the drawbacks as well as the benefits when you choose how to manage your home mortgage.