Purchasing a home is a dream for most people but the huge debt which goes over for a long period of time can make you think twice. Mortgage can mess up with your retirement funds, saving and other financial projects. If you learn to get rid of your loan sooner, mortgage can be more beneficial than destructive. Here are some tips on how to pay off a long mortgage debt.
Purchase a home your can afford without straining. When buying a home, you need to get pre-qualified first. The bank looks at your financial statement, credit and expenditure to determine how much of a loan you qualify to get. However, this number is just a guess from the bank; you may not be able to keep up with the monthly payments. Before agreeing to a loan, make sure you are able to pay off the monthly charges using your income. Examine your monthly budget and choose an amount that
Avoid the variable rate payment. This payment method looks affordable and lenders may use it to trick first time buyers. Initially, you pay your loan at a cheap rate for the first couple of years then later the interest rate increases. It may hold your finances and commitment behind.
Increase your monthly payment to reduce the loan amount in the long run. The additional amount you add every time you make a payment is applied to the balance. This is deducted from the total loan instead of the monthly payments which means the number of years set to pay the loan will reduce. Check with your lender before making additional payments.
Make extra principal payments now and then to notice some changes. Paying monthly interest can be frustrating when the principal amount remains stagnant. Every pound you add to your mortgage payment is directed towards the principal amount reducing the interest you will need to pay overtime and eventually they will cut off some terms in your loan.
Switch your repayment method to biweekly payment. You can make half the payment or more and increase the payment by the end of the year. Extra payments will reduce the calculated time you have to pay the loan.
Pay off all other debts and commit your finances to paying off your mortgage. When you get rid of other loans your disposable income increases and you can use it to pay off your mortgage. If your home loan rates rise it will cause a rise in your personal loan rate and credit card rate, which will increase the interest in other existing loans. Give up on minor luxuries and save that money then use it to pay off some of the mortgage. You may save up thousands of pounds which make a difference to your total amount in the long run. Dedicate all your bonuses, benefits and money gifts you receive towards paying the debt.
You can refinance your long-term mortgage into a short year fixed rate mortgage. The advantages are that you will pay much less interest and in almost half the period of the initial mortgage you applied for. Even with the refinancing, don’t forget to commit your extra finances into paying off the loan for a shorter period.