Saturday, June 10, 2017

Mortgage Payments

So it's time to pay your mortgage. Again. Would you like to be done with that obligation forever and always? Many of us would like to see that one go away. Did you know that you do have some options however.

If you refinance to a 15 year mortgage you will gain several advantages. The monthly cost will likely be higher than a 30 year mortgage payment but you will save thousands in interest over the life of the loan.  You will also shorten the payoff time.

You can refinance to a lower rate but keep payments the same. That way you will have the option to pay the smaller amount if your financial circumstance changes but if you pay a higher amount each month you not only work on lowering the principal balance but lower the interest cost over the life of the loan.

If you have financed more that 80% of the conventional loan you are most likely paying PMI or private mortgage insurance. After  you've reached a 78% loan to value, you will be able to drop the PMI and reduce your payments but 0.05%-1% of the loan amount annually.

Use those tax returns, bonus checks or inheritance payments to pay down the principal balance. Again, this will shorten the life of the loan as well as the long term interest paid.

You also always have the option of making extra payments or higher payments. Maybe a payment every two weeks is a good option for you. Make sure however that the  lender will apply this amount to the principal balance and not just toward the interest. You might be able to shave as many as 6 years off the life of your loan.

The bottom line however is choose the best option for you. If you have a steady income, a shorter refinanced term may be the best option. If your income is less consistent, the flexibility of extra payments when you can, may be a better option.

No comments: