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Tips to Whittle Down Interest Payment on a Mortgage
  • admin
  • July 24, 2021

Tips to Whittle Down Interest Payment on a Mortgage

The mortgage is the significant debt that you owe in your life. It lasts for a couple of years and threatens your financial situation unless you make the final payment and clear the debt. Mortgage consumes a large chunk of your budget, and hence it can be quite difficult to tackle it.

When bills weigh you down, you try to cut back on your daily expenses, including grocery, subscriptions, and inessential expenses, to have a wiggle room. A small tweak in your budget can help you save a lot of money, but these small changes are not going to help you when your mortgage payments are weighing you down.

Interest is a real culprit that shatters your budget. If you want to save money on your mortgage payments, you will have to reduce your interest payment. This blog discusses how you can do it.

How to reduce interest payments on your mortgage

There are various things you need to understand to save money in interest payments.

  • Reduce the length of your mortgage

Most of the time, when you choose a mortgage, you focus on the size of monthly repayments instead of the length of your mortgage. You prefer to choose a lower monthly payment so you can easily manage your other expenses, and as a result, the length of the mortgage is automatically extended.

You may not have realized that the longer the repayment period means, the more amount you will end up paying in interest. Interest accrues over time, and it will automatically go up if you sign the deal for an extended period.

Paying off your mortgage faster can help you save a lot of money. However, sometimes you choose the longer repayment period because of your tight budget. In that case, you should analyze what is exactly the impediment to your goal.

It usually happens because you have taken on other debts. For instance, if you have taken out bad credit loans with instant decision in Ireland, it will be making a burden on your budget. Likewise, if you have credit card bills, you will be having difficulty making larger mortgage payments.

Make sure that you have cleared all of your debts before you start paying down monthly payments. If you do not have any other financial obligations, you will not have difficulty paying down larger mortgage payments.

Choosing a shorter repayment period will save you money in the long run. However, if you do not want to take out debt with private money lenders in Ireland for your emergency expenses, you should always have an emergency cushion.

  • Refinance your mortgage

You take advantage of fixed interest rates for a fixed period, and then the lender puts you on a standard variable interest rate. It means your interest payment will be decided based on the base rate.

If it goes up, your monthly payment will increase and vice-versa. You should refinance your mortgage as your fixed interest rate deal is about to expire. You will likely get remortgage deals at better and more affordable interest rates.

The market rates keep changing, so you should be on the lookout for them. As you notice, the interest rates have declined; you should not bother to refinance your mortgage.

This can be a bit tedious task because you have to shop around all the time, but it can help you save a lot of money in the long run. Try to build a strong reputation by paying down your monthly payments on time. This can work in your favour when you ask for a lender to offer you the best interest-rate deal.

  • Overpay your mortgage payments if you can

Interest sucks. The more you pay down the principal, the more money you will save in interest. You should talk to your lender if they can allow you to overpay your mortgage payment. This can really help you save a lot of money on interest payments.

It is an ideal option only when your lender will not charge early repayment fees because otherwise, it will make more money off your budget and when you do not have other essential debt payments like credit card bills.

A couple of lenders do not mind accepting payments before time. You should ask about the early repayment clause at the time of signing the agreement. If you shop around before buying a mortgage, you will be able to choose the one that lets you avail yourself of this facility.

  • Consult a financial advisor

Financial consultants can help you choose the mortgage deal at the best interest rates. They have the knack of the market so they can better suggest to you some options. Further, they can evaluate your overall financial condition to see if you can afford to pay down the mortgage debt.

There are some apps and online tools that can help you reach out to a number of financial advisors. You can pick any of them based on their experience and qualification. However, some tools can get a line on the market interest rates to decide on your own.

Some tools can help you by taking a comprehensive overview of your financial situation to determine how your mortgage payments can affect your financial life.

Though various tools can act as a financial advisor, you should meet the one in person. They can better suggest you after analyzing your financial condition, long-term goals and emergency etc.

The final word

If you want to whittle down your interest in mortgage payments, you should shop around for an affordable deal.

Try to refinance the mortgage when the market rates have improved. Overpay your mortgage payment if you can. However, make sure that it does not require an early repayment charge.

Reduce the repayment period of your mortgage. All these steps can help you save money in interest.

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