Here are 7
tips on to save on interest by paying your home loan faster.
Owning a
home is one of the most common aspirations among people from all walks of life.
No matter what his status in life is, every person will give anything just to
be able to build a home for his family.
There are
people who have been blessed with a fortune so they can easily build not one
but even two or more homes for their families. Some people who have made it
their life aspiration to own their own homes manage to fulfill their dreams by
availing of a home loan.
Owning a
home through a loan is not an easy task because first of all, the person has to
have a good credit history. He has to find a suitable mortgage provider that
can give him the amount he needs to buy or build his home. Not only that; he also
has to choose the best home mortgage he can get to maximize his financial
resources.
Before
finalizing his application for a home loan, any borrower should evaluate his
capacity to pay off his loan for a specific period. Loan providers prefer to
give long term loans because this is how they make money. Every borrower should
choose a pay-off period that is advantageous to him.
There are
advantages and disadvantages to getting a long term home loan. A long term long
can be beneficial to the borrower because he can negotiate minimal monthly
payments for his home loan. This would be advantageous for him especially if he
can negotiate a home loan with a fixed or locked interest. However, this can
also be disadvantageous for him if the interest rates go down.
On the other
hand, a long term loan can be disadvantageous for the borrower if the interest
rate is not fixed and sudden economic factors cause a notable increase in
interest rates. Getting a long term home loan can also
be more expensive because while the repayment term is long, the total amount
mortgaged can be twice or even thrice the principal amount loaned depending on
the terms of the lender.
In general,
paying off a home loan the soonest possible time would be more beneficial to
the borrower. For one, he is assured that he owns his home without worrying
about the property being forfeited and in effect losing all his investment.
1. Read and
review the terms of the home loan agreement, Check all the
Financial
and pay off terms to make sure the loan is not totally onerous for the
borrower. Calculate the total amortizations you have to pay and choose a term
that you can easily pay off in a monthly or quarterly period.
2. Always
make the home loan amortization a priority when it comes to budgeting. When the
family income comes in, the borrower should always deduct that amount needed to
pay off the home loan amortization to make sure it is not spent on other
expenses.
3. Ask the
loan provider if a rebate is given for early or on time payments. Some lenders
give a rebate every time the amortization is paid on or before the cut off
date. The savings you will get from paying early can be given to the lender as
an advance home payment. The amount may be meager but it will add up and will
later lessen the paying period.
4. Allot a
percentage or better yet, apply all the bonuses and other financial gains to
the home loan payment. This will be considered as an advanced payment and will
get you a breather in case there is an emergency and the money for the home
loan is used for a more important expense like health emergencies.
5. Always be
vigilant about how the interest rates go up and down. When the interest rates
fall down substantially, refinancing the home loan may just be the best option.
However, make sure that the refinancing scheme will lessen the financial burden
on your part.
6. Encourage
family members to take on extra work or projects to add to the family income.
The benefits of owning a home will redound to the whole family so it is
important to make the members aware that pitching in home loan payment will
always work for the benefit of the whole family. Each member who gets and extra
income can allot a portion of that income to paying off the home loan. No
matter how meager that extra income may be, it will add up and will help in
paying off the home loan the soonest possible time.
7. Save,
save and save. Owning a home is a project that requires the head of the family
and even the family members to save and scrimp to pay off the loan fast. The family
can help by saving on energy consumption or other household expenses. The
savings from other household expenses can be used to add to the home loan
payment.
For average
income earners, only a home loan can make the dream of owning a home a reality.
No matter how meager the monthly income is, there is always a chance of owning
a home. However, the family should find ways to pay off the home loan fast so
they can finally and totally own their home.
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