Mortgage Repayment: What Are Your Options?

2007-03-08 10:33:40

( Financial )



Knowing the various methods through which you can repay your mortgage can be of tremendous assistance to you. Mortgage repayment does not have to be entirely difficult; there are ways and means to make the financial burden lighter for you and your family. There are two common repayment options available today. These are capital repayment, interest only repayment.

The most common method of mortgage repayment is capital repayment. In capital repayment, each monthly payment you make covers the interest on the loan as well as a portion of the capital amount initially borrowed. This means that the loan balance gets smaller and smaller as time goes by. If you are paying your mortgage in this manner, you should consider taking out a life insurance policy. This will ensure that the balance of your loan will be paid for, even in the event of personal death or disability.

Unlike capital repayments, interest only payments only cover the interest on your loan. Interest only payments are similar to the minimum payments utilized by credit card companies. This means that there will be no reduction on the initial amount that you borrowed. At the end of the mortgage period, you will have to repay the capital through other means. This mortgage repayment option is usually exercised by those who will be receiving an inheritance or a pension in the future. Again, life insurance will be very useful should any unfortunate incidents occur.

Most financial experts recommend that you not only pay your mortgage on time; you should actually pay them early. Keep in mind that the longer the term of the mortgage, the more interest you will have to pay on your original loan. By paying your mortgage early, you will reduce the overall amount that you will have to pay. There are several ways to do this. One is to add a set amount of money to the monthly payments you are already making. Another is to increase the number of times you make your payments. For example, instead of paying once a month, try paying once every two weeks. Using a debt repayment calculator will also be helpful.

Mortgage repayment is already diffiuclt by itself; you shouldn’t add ignorance to the burden. By continuing to learn more about your finances, you can be sure of making better financial decisions.


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