Do you want to repay your mortgage super quickly and to save a lot of money? If your answer is “yes”, then you need to use the following strategy. It has been proven to produce the best possible results. It requires effort and discipline on your part, but it is guaranteed to pay off.
Loan Amount
You should not borrow more money than you need with your mortgage loan. This is a golden rule which will generate great savings for you. It may seem tempting to get some extra cash, but you have to keep in mind that you will have to pay interest on this money for at least 15 years. It pays off to research the property market in your area in advance to outline your precise property requirements so that you can avoid making a costly mistake.
Down Payment
The size of the down payment which you will make should be at least 20%. The higher this percentage is the better. When you have a high down payment, you will borrow less money. Since the interest rate will be charged on a smaller principal, the total interest amount will be lower. Besides, a down payment of 20% or higher eliminates the need for paying private mortgage insurance, which can be extremely costly.
You should use a strict saving plan in order to get enough money for a bigger down payment. You should definitely put all extra money such as bonuses from work and gifts from relatives aside. Make sure that you will get the highest possible interest on your savings.
Loan Term
The shorter the loan term is the more you will save on interest. Choose a 15-year mortgage in order to get the best results from applying this strategy. This term is sufficiently short, but it will not make the monthly payments sky-high at the same time. When the loan has a shorter term, you will repay it more quickly and this will eliminate the risks associated with staying indebted for longer.
Monthly Payment
A monthly mortgage payment equal to 25% of your income or less will generate maximum savings. This will not only save you a lot of money, but will put you at lower risk of default since you will always have extra cash to use for emergency payments. In general, lenders will only approve you for a home loan if the payment is lower than 33% of your monthly income so the lower threshold required for this strategy should not be hard to achieve.
There are several things which you can do to get a lower monthly payment. You should shop around to find the loan with the lowest interest rate available. You should also boost your credit score as this will give you greater bargaining power when you apply for a loan. In general, if you borrow no more than you need and make a high down payment, you can expect to get a much lower monthly payment.
In order for this strategy to work, you need to generate sufficient savings and be an exemplary borrower. You have to be disciplined when it comes to your monthly spending and to repaying your mortgage.