How To Save Interest on Home Mortgage / Housing Loan
Buying property
almost always involve financing especially for most of those who are buying
their first house. Majority of those who buy their first house buy it when they
are young and when they are not that financially strong and financing is always
used to finance the purchase.A home mortgage or housing loan is a long-term credit that a
house buyer or a house owner obtains from a financial institution to finance his
property purchase or refinance his existing property.
In general , the subject property or house is used as the collateral for the mortgage, thus the term "home
mortgage" is commonly used to described credit facility that is extended by
the bank or financial institution. A home mortgage is usually comprised of a large
loan which is why in most cases a home mortgage or home loan can take 15 , 20 or even 30 years before the borrower can pay back the due amount. In a home mortgage, the due amount to be paid by the borrower
include the principal amount of the mortgage and the interest owed relative to the outstanding
balance which usually translate into a fixed monthly installment over a fixed
number of years.
It is possible to repay the loan earlier than the stipulated repayment period
by making lump sum payment midway through the loan tenure and most bank or
financial institution require prior notice to be given or some may only allow
such lump sum repayment at end of financial year with ample notice. Paying off
the housing loan earlier in this manner save the borrower a lot of interest
charges but the only
disadvantage is that the fund that is being used to repay the loan in the lump
sum manner is no longer liquid unless the property or house is refinanced.
For those who wish to pay off a home mortgage quickly, there are things to be
considered. First and the foremost, the person must make sure that he has a stable source of income.
He has to ensure that paying off his mortgage will not over-extend his cash flow. There are many such considerations that should be carefully planned and organized before deciding to pay-off
home mortgage. Second, it is also important that he has a ready reserve of cash just in case of emergencies.
There is however many choices in the market place today as far as the
housing loan is concerned. In particular there is a type of housing loan that is
offered as an overdraft facility rather than the term loan which is to be repaid
over over a fixed term.
The overdraft facility that is offered in place of the term loan allows
borrower to deposit any amount more than their monthly installment anytime, and
as often as they wish. Any extra amount deposited will reduce the loan interest.
Every ringgit deposited into the account will reduce the loan principal and cut
interest cost and thus shorten repayment period. In addition the amount that is
deposited earlier than required can always be withdrawn to meet individual
financial need so long as the account is operated within the allowable limit.
Therefore borrower can deposit even their salary as soon as they receive it and
later withdraw by writing a cheque be it for personal use or to pay bills but in
the mean time the principal amount is reduced until the amount is withdrawn. The
borrower can deposit whatever fund they have to pay off the loan as soon as they
wish and still have no worry as the fund is always available in case of
emergency.
Therefore be sure to consider the various option available when you decide to take a
housing loan. A wise decision can save you tremendous amount of interest and
paying off your home mortgage earlier can be a extremely rewarding experience. After all, nothing beats a worry-free, debt-free financial status.
More articles
Email this article to friend
Malaysia real estate classifieds
Mortagage calculator
Malaysia real estate directory
