Five secret tips for big mortgage savings

Are you shopping for a mortgage or looking for ways to cut costs on your current home loan? We have news for you: A low rate isn't the only way to save money on your mortgage.

Whether you are a first time mortgage seeker or an experienced homeowner who wants to refinance, there are a variety of programs and strategies that can save you money when it comes to your mortgage.

We asked mortgage experts from across the country to share their best money-saving mortgage tips to help you save on your mortgage.

Get a mortgage from a banker you already use

Loyalty pays off - even when it comes to shopping for a mortgage. So if you have a banking product, such as a checking, saving, or private student loan account, it could pay off to get a mortgage with your lending or banking institution. As a current customer, you may be able to get a rate discount on your mortgage.

For example, TD Bank offers a rate discount of .125 percent to mortgage customers who have an existing checking account with the institution, saysMike Copley, head of retail money-out products at TD Bank. Deals like this are comparable to bundling cable and Internet services with one provider. The reason behind the discount is to reward their customers, increase loyalty to their company, and generate more business.

"It's a life-of-loan rate discount which has the potential to offer significant cost savings over the course of a mortgage," says Copley.

Make your job work for you with an occupation-based mortgage discount

Your job isn't just a source of income. Depending on your occupation, it could help you get a discount when you take out a mortgage. If you're a teacher, firefighter, or police officer, you should research discounted mortgage loans aimed at these occupations.

"Ask about special rate and fee discounts. Institutions like ours offer discounts to community service workers," says Anthony Pili, director of strategic planning for Greater Hudson Bank in Bardonia, New York.

Professionals who work in certain fields receive discounts, because they serve their communities. Some banking institutions, such as Greater Hudson Bank, want to reward them for their service by making it easier to purchase a home.

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See if your state offers a Mortgage Credit Certificate

Many states have a program called the Mortgage Credit Certificate (MCC), which could save you money on the interest of your mortgage, says Aaron Ferkinhoff of Cincinnati, Ohio's Academy Mortgage.

"[An MCC] allows homebuyers to lower their federal tax liability by taking a direct tax credit for a portion of their mortgage interest for the life of their mortgage," he says. This provides a dollar-for-dollar reduction of income tax liability for the life of the loan, Ferkinhoff explains, but there is a limit.

"The tax credit cannot be larger than your annual federal income tax liability after deductions, exemptions and other credits," he explains.

In order to qualify in Ohio, applicants must apply for the certificate through their lender when they apply for their mortgage, he explains.

Additionally, they must meet one of the following criteria: Be a first-time homeowner, must not have owned any real estate in the last three years, be a military veteran, or must purchase a home in a targeted area. Since targeted areas may change, you will need to contact your lender to find out the current target areas, he says.

Borrow money for closing costs at zero percent APR

When buying your home, you'll want to avoid rolling the closing costs into your mortgage, because you will pay interest on the costs for the life of the mortgage, says David Bakke, writer at the personal finance website moneycrashers.com. Instead, he says, borrow the money for closing costs at zero percent.

"Finance your closing costs by putting them on a credit card with an extended introductory zero percent rate," he suggests. The key is to pay it off before the rate jumps.

For example, if you put your closing costs of $2,500 on a credit card with a zero percent rate for 18 months, you could pay roughly $140 each month and pay off your closing costs interest-free.

"This would reduce the amount of your home loan, and you would pay less in overall interest," says Bakke.

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Avoid PMI insurance costs with a piggyback loan

When homebuyers have less than 20 percent equity in a property, they are required to pay private mortgage insurance (PMI). Mortgage insurance protects lenders in case of default on payments.

But you can avoid PMI by getting a piggyback loan, according to Rob Drury, executive director of the Association of Christian Financial Advisors. It's a second mortgage that carries at least 20 percent of the house's fair market value while the primary loan carries 80 percent, which is why it's also known as an 80/20 loan.

A piggyback loan can serve as a 20 percent down payment, lower the loan-to-value ratio, and help you reach enough equity to eliminate the need for PMI, even if it is a loan, says Drury. Depending on the interest rate and how fast you pay back the second mortgage, you could save money, he explains.

But there are potential costs from having two mortgages instead of just one, warns Drury. There may be separate processing, underwriting, and account fees for the second mortgage as it would be an additional loan. So borrowers should also ask about the terms of both loans, he says.

Drury also warns that borrowers going the 80/20 route should make doubly sure they make all payments as agreed to protect their credit records.

"Any derogatory activity [default, late payments, etc.] may apply to two high-end loans rather than one, having a greater negative impact on one's credit history," adds Drury.

With the potential risk, not all lenders allow piggyback loans, but it may be worth contacting your lender to find out if it's right for you.