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Lump Sums Mean Lower Mortgages

In the middle of a depressed housing market, savvy investors are finding a way to consolidate their resources and purchase more real estate than ever. The market is full of low mortgage rates that have lasted for a long time. Many of these rates are at historically low figures that had never been duplicated in recent domestic real estate history.

However, the truly savvy investors are able to save money in more ways than one. Not only are they able to save money in the low mortgage rates that are being offered, but they are also able to save money through their own actions as well.

One of the easiest ways to save money on a mortgage is to pay off a great deal of the loan upfront in a lump sum. This has many advantages other than the obvious advantage of owing less money to the bank.

The first advantage of paying off a lump sum portion of your mortgage upfront is to avoid the PMI attachment on your mortgage payment. The PMI can add as much as 20% to your monthly mortgage rate.

Many banks require added insurance if you do not pay more than 20% of your total mortgage upfront. This is the PMI. It is an insurance payment that is completely scrapped if the lump sum payment is large enough. Simply avoiding this payment can save you tens of thousands of dollars over the life of the loan.

Another way to save money on a mortgage payment is to take advantage of jumbo loan rates.

Many jumbo loan rates carry even lower interest rates than the mortgage rates that are advertised freely on commercials and billboards. Banks are quite willing to take the interest rate down if the principal on the mortgage is high. They stand to make the same amount of money over the same amount of time, so they will appease you by offering this lower interest rate.

However, you can use this to your advantage. If you are already going to purchase a house around the price range of a jumbo loan, you can take it up a few thousand dollars and bring your interest rate down. This will save you money in the overall scheme without taking on any additional payments or risk.