Pay Back Your Mortgages
Some may want to find a mortgage, others need help to pay back your mortgage. It is very important for you to pay back your mortgages as soon as possible. Figure out your estimated monthly mortgage payment by estimating your loan amount, interest rate, and time period. There are four main ways you can pay backs your mortgage: repayment (capital and interest), interest-only, flexible and offset. As an example, if the current market rate for fixed rate loans is 7.50% at a cost of 1.5 points, the buy down gives the borrower a first rate of 5.50%, a second year rate of 6.50% and a third through 30th year rate of 7.50%. Find out which is best for you:
Repayment (capital and interest) mortgages
This can be done by two ways:
- Pays off your interest and your loan
- Straightforward and predictable
Always keep in mind that a repayment mortgage repays the interest only on your loan and the original sum you borrowed. Over time, you start to reduce the sum you owe - make all your repayments and you’ll own your home outright.
Interest-only mortgages
As the name suggests, an interest-only mortgage only repays the interest on your loan.
This can be done by two ways:
- Repayments only cover the interest on your loan
- You still have to repay the sum you originally borrowed
If you have an interest-only mortgage, you’ll have to make separate plans to pay off the sum you borrowed. This is normally done through an investment such as an endowment, ISA, PEP or pension. If the investment doesn’t produce the funds you’d hoped for, you’ll still have to repay the mortgage at the end of the term.
Flexible mortgages
Flexible mortgages are different. With most mortgages, you make the same repayments, month-after-month. But if your circumstances change, the chances are your mortgage won’t change with you.
Choose this option, and you can vary your repayments – perhaps choosing to overpay or put in a lump sum. By increasing the amount you repay, you’re also cutting the overall cost of your mortgage, and helping to pay it off early.
This can be done in two ways:
- Your repayments can vary to suit your budget
- A good way of paying off your mortgage early
Need to borrow extra money? Find out how much can you borrow for a mortgage. Many flexible mortgages offer reserve funds – allowing you to borrow additional money at the same interest rate as your mortgage. This could be ideal if you’re planning a major expense – such as a home extension or a new kitchen.
Offset mortgages
The idea of offset mortgages is simple that is rather than receive interest on your current account and savings, these funds go towards reducing the amount of interest you pay on your mortgage.
- Makes the most of your money to pay off your mortgage early
- Flexibility built-in – overpay or underpay
Do you tend to have a reasonable amount of funds in your current account and your savings? Then an offset mortgage could well save you a lot of money.
Understanding Mortgage Points or Discount Points
A Mortgage Point is an opportunity for you to pay some of your mortgage interest up front. If you purchase mortgage points your interest rate will drop and stay lower throughout the life of the loan. A mortgage point costs one percent (1%) of the mortgage amount. A mortgage point calculator can help you determine whether or not buying points is a good idea for you. Your bank can provide you with the revised interest rate percentage through purchasing mortgage points. Not all banks offer the same terms.
