Mortgage – that obnoxious word that reminds you that you are a slave to your house until the day you die. There is a never-ending series of payments, bills, and stress. But hold up, what if you could make the process… easy? We all know the faster a mortgage is paid off, the less the home will cost you. Interest greatly adds up over time, affecting the equity you actually own. Simple solution – pay it off quicker!
Begin by structuring the mortgage terms to your best advantage for paying down quickly.
This is when a good mortgage broker comes in very handy. A mortgage broker has a better understanding of this process than you do and can ensure the terms give you the maximum flexibility in pay-down or refinancing for better rates. Know that a mortgage payment is composed of an amount that goes to interest, and an amount that goes toward equity. The more equity you have invested in the home, the more of it you actually own. When more interest is accumulated, this ultimately equals less ownership in the home, and the home ends up costing way more than the list price you purchased it for.
Since the down payment is your equity — you already own that portion of the house — not only do you own more initially, making monthly mortgage payments lower but better interest rates are awarded to larger down payments. Earn that lower interest rate, save more!
The frequency of payment makes a large impact in the long run. The difference in interest charged for a monthly payment versus a bi-weekly payment is astronomical. As long as you budget well and the mortgage account is set up for the bi-weekly payments, it’s a wise idea to take the most frequent payment plan possible.
It is a smart decision to amortize your payments over the least amount of years possible. In the past, amortization periods of 40 years masqueraded as a feasible plan, but it became an endless black hole of payments. The smaller payments over many years ensure that you pay the maximum in interest and never earn equity, ultimately never owning and forever owing on the place that you call home.
Sometimes an opportunity will arise to make an extra payment on the mortgage — often referred to as a “balloon payment” — take it! A mortgage broker can visually show you via spreadsheet how all the decisions made along the way affect your finances-for better or worse. It helps to have a visual tool to aid in financial planning.
Hire a Mortgage Broker
Once again, a mortgage broker is a helpful resource for the reasons previously mentioned, yes, but also because mortgages offered in the marketplace are constantly changing, and can be very complex in their makeup. A broker will look at your life, analyze it, and create the best fit. They will remain at the core of the matter so as time passes and your needs change, they will be in the know and ready to help.
Earning more equity is a process with key steps. Following the best plan for you ensures that owning your home is as fast and painless as possible!