What Repayment Plan Should I Set Up On My Mortgage?
Tuesday, October 29, 2013
So, if you have made the step in home ownership, you also now have the worries about the home, but as well, the worries of paying back the money borrowed to purchase the home. A mortgage payment needs to be considered when buying a home, and the amount of money that will be taken out each month (or biweekly) needs to be decided. It is imperative before setting this up, that you have gone through your expenses and income to decipher the best course of action.
If you are like most people, paying off your mortgage as soon as possible is a priority. However, paying the mortgage back and utilizing a repayment plan should not disturb your cash flow and budget. However, if you mortgage period is amortized over a long period of time, you will pay much more in interest over the course of borrowing the money. That is why most people like to pay as aggressively as they can on their mortgage payment. Generally, payments first go towards the interest owing (the cost of borrowing the money) and then on the principle (the borrowed amount). If payments are stretched on for a long time, home owners can expect to pay at least a third more for their house then they bargained for.
Bi-weekly payment plans are advisable as this is a faster way to pay off a mortgage, and is a more manageable amount (coming out twice a month, rather than one large amount once a month).
By opting bi-weekly repayment one can save considerable amount over a period of time and reduce the number of years to complete the mortgage. This will save you in paying interest. Paying down lump sums when you can afford it is advisable as well, as this will lower the principle amount.
You can often find repayment plan calculator’s online to help you figure out the monthly payment amount, the number of payments required and the number of months for the repayment plan.
Owing a home gives the home owner value in property, and sometimes pride of ownership. However, paying off the mortgage can be stressful. If you have a plan in place, and can pay off the principle as fast as possible, you will be well on your way to owning your home outright.