Since the fall of 2015 to the first quarter of 2016 the nationwide mortgage debt has risen by $120 billion to an alarming $8.37 trillion. Even though obtaining a mortgage on a large piece of land may sound like a good investment in the start, it’s not short of financial challenges. It’s an uphill battle for most people and that’s why today we’ve decided to write on this subject.
There is no easy way to get a fixed interest plan on your mortgage, therefore you’ll start feeling the financial strain down the years. Almost all of the US citizens fail to see this coming and as a result, suffer miserably on long-term basis. They are either forced to pay the full amount or let the bank foreclose the property and take it back.
Here are a few tips from knowledgeable mortgage specialists that you should keep in mind if you need to get rid of your mortgage quickly:
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Refinance to a Shorter Period
Before you acquire a land on mortgage and start the course of paying it back monthly over a period of time, you must pay close attention to the contract and how the payments have been panned out. Most commonly by default the payment of mortgage is in 30 years time, after which you’ll own the property.
Most people assume that the longer the time period of paying, the cheaper the payments. But what they don’t take into account is the amount of interest rate that’s applied over the years. So if you refinance your loan to a shorter period, say 15 years instead of 30, the interest rate will automatically go down. The math is simple, if the interest rate per month is 1.5% and you’re on the 30 year plan the resulting interest over the years will raise the price of the house by 540%.
So cross-reference the two installment plans of 15 and 30 years with interest rates and see which one is more feasible to you financially. Either that or look at how much more will you be paying for your home.
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The 15/30 Year Plan Is Your Fail Safe
Whether you’re an organization or an individual, getting rid of your debts is everyone’s top most priority. Mortgage is similar as it’s a debt that’ll hang over your head like a knife for many years down the line.
If all of a sudden you get an influx of cash, let’s say a holiday bonus and a forgotten return of investments, aim to get rid of your mortgage as soon as possible instead of dragging the payments to the entire 15 year plan. The 15/30 year plan is your fail safe; if you’ve become financially strong enough to pay in full then go for it.
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Calculate Interest Rates Smartly
The best way to deal with loans and mortgages is to do a calculated analysis of your payments. Instead of opting to pay the entire year’s worth of interest in one go, divide it by twelve and simply increase your liability cost every month.
If you owe the bank $12, 000 per year as interest, you can easily pay $1000 every month so that at the end of the year, you do not have to cover up any major costs. Dividing the costs over a period of time is the best way to pay-off your mortgage quickly.