A report by the American Economic Association shows that people aged 56 to 61 years hold more debt. Do you want to retire in debt? Taking a mortgage off your shoulders is one of the smartest decisions you can make today.
The minimum monthly installment depends on three factors. Whether you’re consulting with a mortgage lender in Utah, those factors will always be the total loan amount, amortization period, and the accrued interest. Many times, it requires sacrifice to clear a mortgage. For instance, you can be paying more than the stipulated installment every month.
If you are determined to pay off the loan, you must make every dollar count. Soon enough you will be waking up to a house that you’ve paid off. Imagine the feeling of having a roof over your head that belongs to you only!
How to Pay Off a Home Loan Faster
Increase the repayment frequency
Did you know you can alter the number of times you make repayments in a month? This reduces the principal amount. Weekly payments allow you to make extra monthly installments per annum. You may not see the difference at first but it will save you interest.
For instance, consider paying fortnightly instead of monthly. Note that there are 26 fortnights in a calendar year. This means you’ll be paying off an extra two weeks every month hence clear the debt sooner.
Increase the installments when the interest rate drops
Interest rates from banks are subject to change. Take advantage of a low-interest period to increase repayments. Don’t reduce them just because the interest has dropped. This can shorten your amortization period.
Finance your mortgage with unexpected funds
What do you normally do with dividends, job bonuses, tax refunds, and high profits? What if you channel such money to your home loan? This might reduce the interest payable.
Mortgage offset account
This is a type of savings account which you can attach to your home loan. Like a normal savings account, it enables you to make deposits or withdrawals. The best pay is it pays interest at a similar rate as the mortgage.
Use the Most Effective Plan to Repay a Home Loan
To pay off a home loan faster, talk to your lender to see if they can accept lump-sums. They might also suggest accelerated repayments. You can start increasing by small amounts and make sure they are recorded.
Sometimes, mortgage lenders impose penalties if you pay more than what is stipulated in the contract. Always consult your financial institution before making any changes to the terms of the loan. Normally, you will be allowed to deposit lump-sum payments at:
a. The end of a loan term and
b. Certain dates as the loan contract indicate
It is important to conduct a health check for your mortgage. Maybe you think your mortgage lender has the best rates in the county. Have you compared with similar services? You might want to refinance with your current lender. Also, confirm and comprehend all the payment terms and conditions before you sign a deal. Making sure is just as good as making sure that you’re making the most out of your hard-earned money.