Home Mortgage Payment: Some Considerations for Paying off the Mortgage
By Twinty Karat
Owning a dream house is what many people wish and also try hard to achieve. Most people go for getting a loan or mortgage for having their own house at their desired location. Having your own home is great, but the home mortgage payment usually is not.
A life without a home mortgage payment is what many would like to have. But those who have insufficient funds for purchasing a house go for it as that is the only way to own a house. You will have to cut down your monthly expenses to go on with your life once you have a house if you are like most people.
If you want to be free from a home mortgage payment you need to understand certain things that can help you to pay the mortgage without too much pain.
Usually, a mortgage loan is allowed even up to thirty years, and in some cases even longer. However, the best one to choose is a fixed-rate 15-year mortgage. Though most people prefer to have a thirty-year mortgage plan this would be beneficial only for saving a few dollars every month. However, the risk always is there that you cannot meet the higher payments of a fifteen-year loan if you can get it.
Note that in many places in the USA, with the high cost of homes, many who would like to have a fifteen-year loan cannot qualify for such a loan due to insufficient income and/or too many other expenses. One has to meet the lender’s debt to income ratio or in other words still have enough money left after all their expenses to make the home mortgage payment and enough money left to live.
If you are interested in getting a thirty years mortgage loan then you will end up paying a huge sum as interest by the end of thirty years. However, if you are taking a loan for a period of 15 years then the interest you will be paying for the fifteen years is comparatively low with the same percentage of interest. In short, the longer the mortgage period the more interest you will pay.
The monthly home mortgage payment for the fifteen years period mortgage is more than a period of thirty years. People who are having a tight budget go for the thirty-year period mortgage so that they can save quite an amount for using it for other monthly expenses.
If you work hard and pay your home mortgage within fifteen years then the amount you are saving at the end is around $100,000, depending on the loan amount. People choosing the fixed-rate mortgage for fifteen years can benefit from having lower interest rates because the risk for the lender of non-payment is less with the fifteen years plan than the thirty years period of the mortgage.
If you are able to save extra money every month you can end up with a big sum and use it for paying at the beginning of every year to reduce the principal amount. This way you will have to pay less money on interest as well as clear your home mortgage payment before the ending period. It is important that you mention to the lender that the huge sum you are paying should go toward the principal and not on interest. You can pay your saved money at any time you want. However, there are some limitations on the number of times you can make extra big payments, depending on the loan fine print.
Obviously, your monthly home mortgage payment goes less to the principal amount and nearly 75% is paid as interest. This is how you end up paying more interest if you have chosen the fixed-rate mortgage for thirty years.
You can also send checks for an amount of $50 or more, either monthly or after every two months to the lender. The faster you make payments the sooner you will come out of the mortgage payment. This way the rate of interest you have to pay becomes lesser and lesser.
Some people try to make home mortgage payments bi-monthly. This can be possible only after your lender has agreed to this kind of payment. It is not necessary to make additional payments every time. If you have to stop making extra payments you will not be asked to pay the penalty.
All you need to do is to keep paying as you have extra funds with you. This will help you to settle the mortgage faster and get rid of the burden of making home mortgage payments. You can choose any option which is convenient for you to pay for an additional payment.
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