Paying off your mortgage early can save you a lot of money. Besides, it puts you in a better position when interest rates begin to rise and monthly repayments leave you with less cash to spend on other aspects of your life. Many homeowners are not aware there are simple ways to shave off years of unnecessary repayment on their mortgages thereby saving hugely on interest payments.
- Use a Mortgage Broker
Getting a mortgage with the best repayment terms require a bit of legwork and one useful way of doing this is to get a mortgage broker. Many lenders have exclusive deals which may not be advertised but only accessible through a broker. To secure the best mortgage rate with the shortest repayment period, ask a mortgage advisor. They will provide you with fast, free and easy to use mortgage broker services that will reduce the burden of shopping around for the best mortgage deal.
- Maximize Your Down Payment
A substantial down payment reduces the size of the mortgage in relation to the value of the property. Higher equity in the property has distinct advantages. Borrowing less of the value of the property makes the interest rate far more competitive. In addition, it shortens the repayment period and cuts out huge interest payments on the standard repayment term of 25 years. If you are a first time buyer, you can receive a bonus of up to 25% of your savings if you apply for the government’s Help To Buy: ISA scheme.
- Switch to a Biweekly Payment
Making biweekly instead of monthly payments has the effect of reducing the mortgage term because the extra payment goes towards reducing the balance on the loan principal. Reducing the loan principal faster cuts down on the overall interest you pay over the life of the mortgage, but it is important that the lender credits the part payment immediately and not wait until the other half is paid at the end of the month, otherwise the homeowner will not benefit from these biweekly payments.
- Refinance into a Shorter-term Loan
Refinancing mortgage to a shorter-term loan is beneficial because it has a similar effect to paying down the mortgage faster and saving on overall interest payment on the mortgage. It is a good idea to take this advantage and pay down as much of the mortgage as possible when interest rates are low. Homeowners who refinance their mortgages into a shorter-term loan must be aware that there is a possibility of an increase in their monthly payments leaving them little to do other essentials such as updating sections of the property.
- Make Extra Principal Payments
You can also pay off your mortgage early by making extra payments towards the principal sum. This may be in the form of increases in your monthly direct debits or pouring in other income sources such as inheritance or bonus. These measures have the effect of paying down the mortgage faster, with the benefit of making savings on the overall interest payment.
Paying down your mortgage early is undoubtedly an effective way of buying your house without overpaying for it in the end and you need to be aware of all the additional costs before deciding on how much you can spend on your dream home.