Elections can be polarizing, especially when each side does its maximum to minimize their opponent's strengths. When it comes to saving money and getting great deals, though, it doesn't matter whether you're a Democrat or a Republican. Both parties boast conservatives, who often have goals of cutting costs and saving money. No matter what your political affiliation is, if you want to keep financial surprises to a minimum and get the best deals around, here are some conservative ideas to help you manage your mortgage.

Get it fixed


A fixed-rate loan may be the fuddy-duddy of the mortgage industry, but there's a reason it's the most popular lending instrument. Unlike its unpredictable sibling, the adjustable-rate mortgage (ARM), a fixed-rate mortgage offers the same interest rate and monthly payment for the loan's lifetime. No risk here... just the same safe and predictable payment until you own your home free and clear.

Conservative thinkers like to know how much they'll be out of pocket each month for their mortgage payment because it helps them plan their budgets for the rest of their working days, and even into retirement. Plus, if you lock in a very low interest rate, you'll enjoy it even more in the future when interest rates rise, which they inevitably will.

Shortest possible term


Fiscal conservatives know that the shorter the loan term, the less they'll ultimately pay. The most popular mortgages are for 15- and 30-year terms, but you can also get terms of 20 or 25 years. With a shorter term, your monthly payments are higher than with a longer-term loan, but in the long run, the amount you'll pay out of pocket will significantly decrease. Take, for example, a $200,000 mortgage at an interest rate of 4.5 percent. If you choose a 30-year mortgage, your monthly payment will be $1,013, and you'll pay a total of $364,813. If you choose a 15-year term, your monthly payment will be $1,529, more than $500 higher per month than the 30-year. But by the time you pay off the loan in 15 years, you'll have paid a total of $295,397, a savings of $69,416 over the longer-term loan.

Pre-paying


If you want to pay even less money over the long term, pay more in the short term. Accomplish this by making principal pre-payments throughout the life of your mortgage. There are two ways to do this. The first is to send in an additional principal payment each month. Make sure that you notify the bank each time that you do, either by checking the "principal prepayment" box on your monthly form, or by writing a note to the bank indicating your intention.

The other way is to find a mortgage lender that will let you pay bi-weekly. If you pay monthly, you're making 12 payments per year; but if you pay bi-weekly, you'll be making the equivalent of 13 payments a year. This will help you pay off your mortgage early and save lots of money.

You may not be a political conservative, but it never hurts to understand how they think, especially if it will save you money on your mortgage.

    Published on May 10, 2008