The term ‘Mortgage’ sounds quite loaded and people who’ve taken the risk to attain one surely experience tremendous stress. People choose to take this heavy debt on their shoulders for several reasons. It could be to purchase their dream house, pay for their child’s education, go for a vacation that was long overdue or to avail a student loan.
If you ask someone who has taken out mortgage and is currently repaying it, then they won’t be too glad to share their tale of woe. On the other hand, for all those who are in a dilemma regarding the repayment of a mortgage, discussed below are some ways to get rid of the hefty debt in a decade:
Understand what a mortgage is and then utilise it
If you have ever enquired about mortgage you will find out about the cost involved, the loan rates and the points. It is very important to understand the calculations as you are the one who is going to repay it.
Ideally, there are two key points that every individual must keep in mind:
o Origination fee: This is the fee charged by the lender in order to cover the cost of making the loan.
o Discount: The prepared interest levied on mortgage. This is in inverse proportion which means the higher an amount you pay, the lower the rate of interest charged.
It is recommended to calculate your mortgage because if you are planning to retire in the near future you surely want to get rid of this soon. You can do so by gaining good points as they can help you pay off some of those heavy interest rates. This way, you can save on the interest rates each month and reduce your entire mortgage payment.
Purchase according to your affordability
Before you apply for any financial aid it is essential to get a pre-qualified first. This way, you can repay your mortgage within a span of two years. The bank may check your financial history and grant you a specific amount in form of loan.
If you are purchasing a house you probably would not use the entire amount if you are smart. Instead save some to carry out the allied activities and purchase a home which you can afford.
Cut down other debts
The thumb rule to get away from debt is to clear away the most expensive debt first. This is done with the sole purpose of not paying higher interest and save your money. Also, this gives you a chance to clear your debt at a faster pace. Keep in mind that it is smart to clear high-interest loan and credit card dues before overpaying your mortgage. The former can be really expensive and can burn a hole in your pocket.
While repaying credit card and loan instalments, make sure that you check the amounts paid and that it does not consist of any additional charges. There have been instances in the past about mis-sold policies affixed to them. You definitely may have heard about people making PPI reclaims well, this is to recover their lost money.
Fortunately, there are companies in the UK that can guide you to acquire your deserved compensation by following the correct legal process.
Bi-weekly payments
A bi-weekly payment can reduce the total number of payments you are likely to make otherwise. If you make 26 bi-weekly payments in a year you ideally get an additional month to make payment in the year. This ultimately shortens the period to make your payments.
This is a good option for all those borrowers who can repay the borrowed sum in a well-defined format that to in a comparatively shorter span.
Target the Principal
There are various instances in the past where borrowers end up paying only interests for initial few months. During this period they feel that they have not yet started paying for the principal amount that they are liable to pay. One cannot deny this fact about mortgage repayment because it is calculated on compound interest.
The best thing is to make sure that you pay-off your principal amount as fast as you can. Once you have paid the actual borrowed sum the effect of interest also varies. This means that you are charged a smaller rate on the remaining payments.
Save the extras
All round the year you may have received some gifts or additional bonuses, etc. At times, you receive bonus in cash and if that’s the case, then it is the right time to save it and put them to use to get rid of your debt.
If you do not have sustainable emergency funds to protect you in a situation of crisis, then it is suggested that you save these additional pounds in form of emergency funds. This way, you are not completely at loss of finance in the need of the hour.
Set your priorities and accordingly take decisions because every individual goes through different circumstances.
Additional Income
Any type of debt is a burden because it’s an additional expense to an individual. One good way to stabilise this extra burden on your pocket is to increase your monthly income. Look for a part-time job or freelance to earn some additional pounds.
You can also pursue your hobby to get an extra income. For example, if you are good at designing and like doing it, then look for freelance designing jobs. This way you can earn money, as well as enjoying what you are doing. Plus, earning an additional income will certainly lessen your burden.
