Mortgage rates are hovering close to 4.5% and could reach 5% during this busy home buying season. Before you sign on the dotted line for your mortgage payments, make a plan to cut down the costs! Whether you’re buying your first home, or you’re downsizing like many of my clients who are approaching retirement and don’t need the space, the first thing to do is figure out how much you can afford.

Build a Healthy Down Payment – This is an easy one if you’re older and downsizing your home, because you may make enough from selling your larger home to pay cash for your new one. However, if you’re younger and buying your first home, you’ll need to work to build your down payment. You should plan to have at least 10% at the time of closing. If you can afford 20%, you won’t have to pay private mortgage insurance, which costs about a half-percent to one percent of the loan each year.

Make Biweekly Payments – Most mortgages are set up so you pay them once a month. But, instead, try making half of your payment every-other week. That adds up to 26 half-payments, or 13 full payments, per year. By making that extra payment each year, you can take eight years off a 30-year mortgage, depending on the interest rate.

Refinance to a 15-Year Mortgage – By refinancing from a 30-year mortgage to a 15-year mortgage, you can cut down on the interest you’ll pay. As an added bonus, 15-year mortgages often have interest rates about a quarter of a percentage point to three-quarters of a percentage point lower than 30-year mortgages.

Click here for a calculator to determine how much you can afford to pay for a home.

A mortgage is considered a “good” debt because it grows in value and has a low interest rate. If you have “bad” debt, like credit card debt, you’ll want to make paying that off your top priority. Put extra payments and “found” money, like a bonus at work, toward eliminating your “bad” debt first, and then work on paying off your “good” debt.