A mortgage is a heavy burden on your daily household budget. By spreading into monthly installments, which are often repaid over years, always a percentage of our income goes towards the repayment of this commitment. However, it may turn out that you will gain funds faster to get rid of the loan. Early mortgage repayment – is it worth it?
It is difficult to find a person who in the long run does not dream of owning their own apartment or house. A permanent flat gives not only a sense of satisfaction, but also security and peace. It is a space to rest, spend free time, develop your hobby, indulge in cooking, watch movies or work. A place where you can watch for years how the family grows and changes, and with it – the whole environment.
Mortgage – a popular way to get your own four angles
In monthly commitments, there are plenty of costly commitments that can effectively hinder the deposition of larger sums of money. The fact that many consumers are trying to accumulate as much savings as possible for expenses similar to buying a new apartment. Unfortunately, the collection of sums within a quarter of a million dollars and more – may run out of time. So how can it help you get your dream four angles?
It is a mortgage, also commonly referred to as a flat loan. In short, it is a commitment given by the bank for a specific purpose – the purchase of an apartment or real estate. By transferring a specific sum of money, the consumer buys the indicated property in which the mortgage register is entered. Estimation of the value of the property is done by an expert acting on behalf of the bank. In turn, the terms of the mortgage are tailored individually to the consumer on the basis of a long verification phase.
Credit parameters are selected by assessing creditworthiness, as well as by verifying the amount of earnings, monthly obligations, marital status, dependents and the age of the consumer. Finally, the bank calculates the total loan amount. It adds additional costs to it, such as a commission, a fixed interest margin or interest. In total, the monthly loan installment is calculated, which includes all these parameters – both the loan amount and all costs.
How is the mortgage repaid?
The consumer undertakes to pay the installments of the loan in a fixed amount for a specified period determined from above. This is done monthly, usually for many years, e.g. 10, 15 or 25 years. The borrower, after obtaining the loan, is obliged to use it for a predetermined purpose. In addition – he has to pay it back conscientiously in specified amounts, on time, with continuity and regularly. In this way, every month you should remember to deduct a certain amount from the payment to pay the mortgage.
But what if an unexpected scenario occurs in the future? Many consumers on this issue are looking for information on the Internet about the unexpected deterioration of their finances, wondering whether, for example, you can extend the repayment deadline or postpone paying the installment. Random events are not only negative, but also – if not seen – positive. It may turn out that the borrower’s financial standing has improved significantly over the life of the loan.
Not only did his monthly income and the corresponding standard of living increase, but his ability to meet his obligations also improved. After such an improvement, the consumer may often be able to pay off his mortgage much faster. A loan for an apartment is a burden on monthly expenses and many are trying to get rid of its yoke as soon as possible. Is accelerated repayment of this obligation really a solution that gives peace of mind and relief?
How can you reduce the duration of the loan?
The duration of the loan, although determined when signing the contract with the bank is set as a fixed and binding parameter, in some cases it may change. Just as consumers in a worse financial situation can negotiate an extension of the repayment time, so can consumers with a good period for their budget can request a shorter repayment period. How can you try to pay the amount due faster?
- The first way to deal with the loan faster can be to make one or regularly paid overpayments. The consumer may pay an installment for the loan in an amount greater than the payment he has undertaken to make. In this way, the remaining part of the loan payable decreases faster. Maybe even thanks to a one-off overpayment, it will be repaid more quickly. This happens if, let’s assume, there is not much left to complete the loan.
- The second way is to pay a significant sum of money once, in order not to overpay, but to assume accelerated repayment of the total value of the loan. This is an activity that dramatically speeds up the loan repayment deadline and allows you to get rid of it quickly. Unfortunately, this is not without the costs to be borne by the bank.