When it comes to prepay a mortgage, there are many tactics you can hinge on. Nowadays, load of folks are choosing prepayment as a best way to get their neck out of debt. There is no doubt that once you pay the whole amount, you can lead your life debt free but thatís a little white lie. Before you make a prepayment, there are lots more things that you need to consider to be on a safer side.
Put your thinking caps now as itís the time to know about an effective strategy and bring it into play:
If you apply for only a definite section of loan that you need, you can easily escape from a long term debt and changeable interest rates. Bear in mind, the loan is easy to pay for but not the interest; it will go long even when the loan amount gets wholly paid. Choosing a precise property, you can save on money and get relief from the long lasting monthly mortgage payments. You should do prior research of market so you can invest in a right property and prevent big risks to come about.
Many banks offer home loans at one cost and that is to pay at least 20 % of a home purchase price. More the down payment you make, the fewer your mortgage payments will be. At the same time, the interest rate would be applied to a smaller loan amount and as a result the interest rates would automatically go less. Whatís more? You can also eliminate the chances to opt for a private medical insurance which is entailed if the down payment made is less than 20% of the entire loan value.
You should make a proper financial plan to manage to pay for long term loans. Use as much hard cash as you can, but keeping the ongoing as well as upcoming expenses in mind.
The span of the mortgage plays a big role in playing down the interest. Choosing a short term loan, you can end the loan period early and enjoy a life that would be free from debt happily. The monthly payments can a bit more but it would not be too high that canít hold to pay for. With short term loan you can also avoid the risks that may come with a long term loan.
Equated Monthly Installment (EMI)
Monthly loan payments which is more or equal to 25% of your income would be best to produce investments. This will give you time to save money and to gather funds in case of instant payments. Lenders themselves approve a loan when the borrower can afford to pay 33% of his monthly income, so they do not find it hard to attain.
All of these strategies can lessen your monthly loan payments and help you repaying loan before time. You always have the option to apply for a minimum duration loan with minimum interest rates. Borrow only that much amount which is crucial for home purchase and can be returned over a small time with least monthly loan payments.
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