It is a great feeling to be a property owner, but paying a fat piece of your salary against its EMI isn’t the happiest feeling. In addition, if you have to keep paying this amount for 10 to 15 years constantly every month will certainly frustrate you.
In the end, you will end up paying more principle than you borrowed because of the high interest rate charged. The solution to this problem is to pay off the mortgage as fast as you can to clear the debt burden and save money for the future.
Create a debt repayment plan
Before making the decision of repaying the debt fast, you must have accurate knowledge of how much you owe the lender and the amount needed to paying it off. Create a list of your current debts as well as the interest rates and balances. This helps to keep track of your credits and ensures that the money is going towards the right path.
A budget will lead you to identify those areas in which, you are overspending. It may also facilitate you to direct your money, in a more purposeful way. First thing is to figure out, your monthly income and expenses.
The next step is to limit your extra expenses, so that you can comfortably arrange money for the mortgage loans EMI, which you have decided to pay off soon. Try to cut expenses where ever you can, because the more money you save for repaying the debt, the less time it will take to end the loan.
Make Fortnightly Payments
Submit half of the payments to the lender, after every two weeks rather than the regular monthly payments. This will help to accomplish the following three things:
- Less interest will get accumulated because the payments will be given more often.
- You will pay an extra payment. There are fifty two weeks in one year, which equals to twenty six yearly payments or may be one extra.
- Doing this for the entire duration of the loan can cut off several months.
Ensure that there are no penalties
Do ensure to discuss about the penalties with your lender, before you decide to make bi-weekly payments because some loans can charge you penalties for repaying them early.
If you would have known this fact before accepting a laen, you could have avoided the lender that charged prepayment fee. If you were ignorant and now you have come to know that there is a penalty for prepayment of the loan, check how much that penalty will cost in comparison to your savings on interest by repaying the loan early. This will help you to determine, whether it is financially sensible to repay the debt early or should you add it in your savings account and pay EMI’s on their due timings.