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Repaying the mortgage

by professionalseo

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                    Repaying The Mortgage – 
                               Things That 
                   You Should Remember

It is a common trend to take out a mortgage in order to buy a property. More than 95% people do the same. But the most important thing is to repay the mortgage in full. While repaying the mortgage in full, one needs to be careful about various things. Unless you take the right financial decision, you will land up in a mess that will jeopardize your life in years to come.


Pay off mortgage or opt for an emergency fund

When you get some extra cash in hand, you may be in a dilemma whether to use it in repaying the mortgage or creating an emergency fund. It should be noted that the best option will be to get rid of the any debt ASAP. Getting rid of one debt or mortgage will give you ample mental peace and definitely improve your credit rating and will have a positive impact on your credit file. However, creating an emergency fund is also of ample importance. You may use 90% of the extra cash in hand to pay off the mortgage and put the rest 10% in your emergency fund.


Pre-payment penalties

While you think of repaying the mortgage, an important factor that you need to consider is the pre-payment penalty. Before you decide to pay off the mortgage ASAP, you should read through the mortgage documents carefully to find out whether or not there is a pre-payment penalty clause mentioned in it. Of late, most lenders are including the pre-payment penalty clause in the loan documents. It means that if you pre-pay your loan before a stipulated period of time, the lender will charge you a penalty. This will help the lender recover a part of the interest payments that he would have otherwise received if you have paid off the loan over the term.


Refinancing to repay the mortgage

Of late, the mortgage rates are quite low even though the market is improving. Interest rates will be high for those borrowers who have taken out mortgage loans during 2005 – 2006. As the interest rates are going historically low, they can refinance their home mortgage with a low interest loan and pay off a high interest mortgage. This will help them in saving more money which they will have to otherwise pay off in high interest payments. However, in order to get a mortgage refinance, the borrower needs to fulfill all the required criteria of the lender.


Moreover, it should be noted that there are closing costs associated with the refinanced loan. So, you will have to make sure that you stay in the same property for few years in order to offset the closing costs. Also, while you opt for refinancing, you should make sure that the interest rate that you get is at least 2% lower than your present interest rate.


Thus, now you know some of the important things that you need to consider while repaying the mortgage. You can even take help of the mortgage repayment calculators which can play a great role in guiding you in repaying the loan.

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