Effective Approaches to Mortgage Loan Payment Essay

Well, the mortgage is considered as long term debts and having a good grasp of your financial situation, can help you in paying off your mortgage sooner rather than later. Especially when your financial circumstance improves after you take out your mortgage. You can certainly work with a mortgage expert on a better repayment plan to save on interest payments. Or if you are financially secure  free of highinterest credit card debt, and have an emergency savings account that can cover 6  12 months' living expenses then paying off your mortgage makes sense.

Here are few suggestions on how to whittle away home loan quickly, if you can afford and have no early redemption penalties mentioned in your mortgage agreement, then definitely its a good idea while you have extra saving cash.

Add Principal to Your Current Monthly Payment

If there is no prepayment penalty with your mortgage agreement, then add principal to your monthly payment. This can be the simplest and early pay off plan, which will reduce your principal amount thus the loan balance used for the reckoning of interest charges will also be decreased and enable you to pay off your mortgage faster. This can be the best option once you have a cash flow that you would not require in your daily budget allocation.

Refinance and get the Low Interest Rate

Alternative approach is to refinance your current mortgage to a lower interest rate while keeping the same term and maintaining your previous payment levels meaning does not lower your repayments if interest rates drop. If you planning to stay at your home for at least three more years and your mortgage is Aed 1 Million, with an interest rate of 6.5 per cent or higher, ask your current loan provider for the best refinancing rate and compare it with the other banks rates. Or opt to work with an independent mortgage consultant to find the best lowest rate in the market. If you can reduce your current rate by 2.5 to 2 percent even, go ahead and refinance. All the savings comes from reduced interest costs, will go to principal pay off.

Refinance to get the Shorter Term

It is a common practice to buy a home on loan with longer pay off periods such as 10, 15 or 25 years. But here we say rather than pay over a 25year amortization, reduce the term to lesser period. The EMI (Equated Monthly Installment) will be higher side but the interest rate is usually lower, thus equipoising some of the monthly outflows. The longer the tenure, higher the interest paid. Else, keep the same mortgage tenure, but make your repayments as if it were a 15year or lesser amortization. You will not be getting the reduced interest rate, but you will also be not pay refinancing costs. Many prefer this mutation due to increased flexibility and reduced interest cost while some select the obligatory discipline of the monthly payment to keep it safe.