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What is The Best Way to Pay Off The Mortgage?
How to cope with the loan better? Is it better to pay more during the first period and then subsequently pay less or to divide the loan on equal payments to omit the financial overloading? Every potential borrower that wants to purchase the house with the help of the mortgage faces this problem.
There are equal monthly installment and variable payment plans. What is better to choose? Equal monthly installment or variable payment? There are pros and cons in each scheme. Firstly, make the sense what is what.
Equal monthly installment is a fixed payment amount made by a borrower to a lender at a specified date each calendar month.
In general: the mortgage company (or bank) adds to the size of the loan amount, the borrower have to pay, the interest on the loan. The resulting amount is divided to the number of payment periods (usually months), during which the borrower pays th mortgage loan.
Thus, when the amount of the loan is $ 250,000, provided for 20 years at 5% per year, equal monthly installment is $ 2,083.34 per month. In total, over the entire period of the loan repayment the customer has to prepay $ 500000.
The total prepaid amount can exceed the nominal size of the loan more than in twice even when the interest rate consists of 5% per year.
Monthly payments are different in case of a variable payment plan. The most difficult are the first few years of prepayments. Then, after each month the loan payment will be reduced.
Usually in case of a variable payment plan the coast of the loan is significantly lower. The longer loan term, the bigger is the difference.
Most often, clients prefer equal monthly installment on mortgage loans. It is more convenient: it is easier to make one calculation during credit holding time and the total amount of the loan is very attractive for banks and mortgage companies.
Usually, a man who has recently celebrated a housewarming party at this moment faces many planned expenditures and unbudgeted expenditures. It is possible that the apartment will need the remodeling. Or maybe you have to purchase new furniture, appliances and other accessories.
In this case, to pay high monthly payments is hard enough.
Choosing a mortgage product, you must clearly assess the life situation of the borrower. Think about whether you are ready to accept some restrictions in the early years of the loan prepayments to improve the financial situation in the near future?
It is advisable to consult the lawyer and a mortgage advisor. It significantly reduces unpleasant surprises.