Did you know that the interest on a home mortgage loan could cost the homeowner nearly two times the sales price of the home? We will make that clear for you. Suppose you were to purchase a $100,000 home with a mortgage loan of $80,000 (80% of the sales price) and you paid an interest rate of 9% for 30 years. You would have paid over $151,666 just in interest (in addition to the original loan amount). That's nearly two times the cost of the home. You may not have calculated this, but it is true!
This will prevent you from paying off your debts in time. But the interest continues to mount up with the loan balance getting higher. You can overcome this situation with a refinance loan, but there may not be enough equity in your home. You may have credit card debts that will prevent you from repaying your mortgage loan at regular intervals.
An easy way out to this problem is to make extra payments towards the mortgage loan. Such extra payments towards your loan amount can reduce the total interest and thereby help to repay the loan much before the loan period. This helps you to save cash for future investments.What you should remember while making extra payments:
- You may be charged a prepayment penalty for paying off your mortgage loan before the loan period. So while you intend to make extra payments to pay off your mortgage in a short time, just check out if there is any such penalty involved. There may be cases where lenders consider a part of the extra payment as a service charge. So before you plan for extra payments consult your lender regarding these charges and make sure you send a separate check for the extra payments. You should also send a note stating that the extra amount is paid towards the principal amount. Otherwise, the lender may just apply it towards next month's payment and still charge you the interest.
- Most of the mortgage companies don't have this problem. Nevertheless, make sure to keep a watch on this. You should also avoid late payments for which lenders often raise your interest rate to over 25%.
These tips and tricks can help you only when you shop around for the best loan programs in the market and make the necessary calculations for probable mortgage payments. You need to have patience and move ahead with a planned budget. Explore all possible ways before you choose the one that can assure you a debt free life.
Sometimes, even after knowing all the facts we get trapped into liabilities. If you are under debt, our experts are always there to help you consolidate them.
Debt consolidation is a much better way to get rid off your debts and we are experts in this field.