Reasons Why Paying Off Your Mortgage Faster Is Not Always A Great Idea
One of the most important accomplishments that an individual could make is to own their own home outright. You would save more money on interest the sooner your mortgage is paid off. You could take years off your loan by taking several easy steps which will help make sure you are paying off your mortgage as effectively as possible. The best part is, this method is completely free.
1. You will firstly acquire your credit score before you start to shop around for the best mortgage. The ongoing service fees which the mortgage company charges are usually not unreasonable, but it is wise to know exactly what fees will be charged before you sign on a loan. It may be in your best interests to talk to a mortgage broker at this time.
2. Choosing either monthly, weekly or bi-weekly payments is the second step. A bi-weekly mortgage means that payments would be required 26 half-monthly payments instead of 12 monthly payments. Nonetheless, you will save a substantial amount on interest. It is vital to note that if your mortgage is originally set up as bi-weekly, your lender could charge you an upfront fee of $300-$400.
For example: Making two payments of $415 in leu of one $830 payment, interest savings over the duration of the mortgage loan would be approximately $27,000 and will enable you to pay off your home faster by 4-1/2 years.
3. The third step is to pay a little bit more every month. Even a slight increase of a few dollars will lessen the amount still owing on your principal amount. If you can pay an extra 10-15% percent each and every month then you will be in a good position to pay off your mortgage faster.
Like for example: By upping your payment from $830 to $1000 each and every month, you could save practically $48,000 in interest and pay off your loan 8 years early.
4. Making a lump sum payment at least once a year utilizing your work bonus, tax refund or from saved money, this could significantly help decrease the amount remaining on your principal. It is a great idea to check your mortgage documents in order to see how often you are allowed to prepay and in what amount to be able to make certain that you will not be subjected to any additional fees. Although the majority of mortgage loans do not prohibit you from paying off your loan early, some loans do have parameters concerning any extra payments which you can make.
5. It is a good idea to pay off as much of your mortgage as you could at renewal time. At renewal, you could pay off as much as you want because most mortgages become open.
6. Make certain that you check your mortgage payment to be able to ensure that your additional payments are being put straight against the principal. It is essential that the bank correctly records each and every payment that you make. Any additional payments that you make must be done utilizing a separate cheque. On the memo line, make sure you note that they payment must be applied only to the principal. At the end of the year, when doing your taxes, compute the payments and make certain that the whole amount which you paid has been applied correctly.
7. The final step is to make certain that you stay up-to-date and informed about your mortgage. New products are coming out each and every year and the interest rate is always fluctuating. There is the chance that you might want to shop around for a better product eventually.
Like for instance: You might only qualify for a lower-rate adjustable mortgage initially. At some point later on, you might decide to pick a more long-term affordable fixed-rate mortgage.
It is not always in your best interest to pay off your mortgage more quickly. Like for example, some individuals may decide to invest in mutual funds when the yields return 10 to 12 percent every year. Usually, nearly all individuals decide to pay off their mortgage instead.
If you have plans to move in the near future, it could be better to avoid investing your money. Saving your money and using it for a down payment on your new home might be better then investing money into your current home.
By following these simple steps and doing a little research it is entirely possible to save thousands of dollars on your mortgage. However, the banks would not tell you how to save money as that would make them lose money and their profits would come to a standstill.
As an avid writer on scores of subjects, Jim Fairbankpresents you with comprehensive information on matters of importance. One of his areas of expertise can be found in the tourism and vacation golf industry. The mortgage broker industry can be strenuous to navigate. If you are interested in locating a little bit extra concerning the business, you may want to visit Coquitlam Mortgage Brokers, as it is a fantastic resource that focuses on all of the fine details that some authors overlook.
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