elimination, this is the word that rings a bell
in many of the home owners out there. Ever imagined paying off
your mortgage in one go when you strike a first prize lottery or
the day you inherited a lump sum of cash from a deceased old
woman down the street whom you always say good morning to?
Reality says this is not going to happen nor is there any
magical formula that will pay off your mortgage the next day.
Well, if you’re still reading after the first paragraph, there
are actually ways that would make you better off by lightening
your mortgage debt.
First off, one of the most commonly adopted methods is to
increase your monthly mortgage repayment. By increasing your
monthly repayment rates, you are effectively shortening the
duration of your repayment period. I’m sure most of the
homeowners out there would realize that by the end of their
repayment period, they would have paid off more than the value
of the house itself. This addition of payments would namely be
known as interest rates. By shortening your repayment period,
you are effectively decreasing the amount of interest rates you
pay. A quick illustration says that if you pay an extra $100
per month for a $120,000 (30 years @ 9%) mortgage, you would be
looking for a saving of approximately $80,000 after the end of
your repayment.
It should be noted that there are shortcomings in increasing
your mortgage repayment rates. For example, the extra $100 per
month could have been invested elsewhere that would potentially
generate more than $80,000 under the same period of time.
However imagine this; if you are someone constantly being
tempted to stick your hand into the piggy bank, increasing your
repayment rates would be a wiser option as there is a good
chance of you blowing away your investment/savings before the
compounding of interest rate takes effect.
Secondly, this seems like a rather old suggestion but if you
cannot afford more than 20% down payment, you should rethink
the value of your house. The reason is because for a less than
20% down, you will be required to pay for additional insurance
which is known as mortgage insurance. Unlike a life insurance,
the mortgage insurance is there to protect the better interest
of the bank (ssshh, let’s not say you hear that from me)
because it covers only the mortgage. Life insurance basically
covers you because in case unpredicted fate takes place in your
life, the compensation would be able to cover your mortgage and
your life whereas mortgage insurance basically covers only,
errr the mortgage.
Last but not least, consider this when you are taking your
mortgage. If you are a wise money saver (or we call them penny
pincher in some cases) and if this is within your means, take a
shorter repayment period. In the short term, it may seem you
are paying more compared to other homeowners. However consider
this, your mortgage is spread across for 15 years as compare to
30 years and effectively, although you are paying an extra say
$100 per month, the savings from interest rate paid for a 30
years mortgage will not even come close to what you have saved
from a 15 year mortgage. Additionally, the plus is you get a
peace of mind and security knowing you have paid off your
mortgage earlier.
Think about this, buying a house is one of life’s biggest
purchase. If you think you are not ready, take a little time
off for reconsideration as the decision you make today would
affect you for years to come.
About The Author: The new bankruptcy law provisions have
prevented people from above a certain income level from being
able to eliminate or cancel their debt through bankruptcy. Find
out more on how you can save yourself with Paul’s essential debt
elimination resource website at
http://www.mydebtelimination.info
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