If you take out a mortgage loan, the first and the foremost thing that you need to take into consideration that you have to repay the loan. You have to repay the principal loan amount along with the interest amount. Usually you make monthly payment to repay your mortgage loan. It is very important not to default in making payments. In case you default in making payments, you may have to face the negative consequences of filing for bankruptcy.
It is very much important to put in place right type of mortgage repayment strategy so as to pay down your mortgage loan in a smart way. You may be interested to pay off your mortgage early than the scheduled time. This is so because you may be interested to attain financial freedom and to own your property much earlier. Here however it is to be noted that in case of early repayment of the loan, there are some prepayment penalties. Lenders charge prepayment penalties from the home buyers in the event of early repayment of the loan. This may be so because you may be interested to refinance your existing mortgage loan so as to enjoy the advantage of lower mortgage rate. Anyways, you should be well aware of the amount of repayment penalties associated in a mortgage loan. In fact, mortgage lenders are legally responsible to disclose all the costs associated with a mortgage loan. Anyways, here we discuss about some common options to repay your mortgage loan in a smart way.
Make extra payments on the principal amount
One easy way to clear off your mortgage loan faster is to make extra principal payments. If you make extra principal payments on a regular basis, you will be able to lower down the principal balance on your mortgage loan. Here, it is to be noted that the earlier you start making extra principal payments, the faster you can clear off your mortgage burdens.
Make bi-weekly mortgage payments
Instead of making monthly payments, if you make bi-weekly payments, you will be able to pay off your mortgage loan earlier. This is so because if you make bi-weekly payments, it implies that you make 26 half payments in a year. Here, it is to be noted that there are 52 weeks in a year. Again, 26 half payments imply 13 full payments. On the other hand, if you make monthly mortgage payments, it implies that you make 12 full monthly payments in a year. So, it is apparent that in case of bi-weekly payments, you make one extra full payment in a year. In the long run, this actually helps you a lot to pay down your mortgage loan early.
Anyways, the type of mortgage repayment strategy that you want to adopt depends upon you and of course your lender. You may be interested to convert your monthly payment system into a bi-weekly payment system, but your lender may or may not be willing to offer you that facility. It is however to be noted that the faster you implement any particular early mortgage repayment strategy, the faster you can attain financial freedom.