3 Ways in Which Mortgage Debt Can Be Paid Quicker

low interest rateIn an article for the website Property Update, Michael Yardney talks about the ups and downs associated with home ownership. While buying a home and fulfilling a long-cherished dream is no mean achievement, keeping pace with the mortgage repayments is a difficult business. The faster you build equity, the lesser interest you are required to pay on the debt over the whole tenure of the loan. This cannot be done unless you pay your debt at a sprightly pace, often much higher than the stipulated repayment amount.

How can mortgage debt be reduced fast?

Yardney’s question then is- How can the debt be reduced fast? His answer takes us through a three-pronged approach to the matter.

Bargaining for the best rate

Before other things, there is the need to haggle over the best possible interest rates. The climate of low interest rates has made it easier for the borrowers to make their mortgage repayments. Such low rates have made it a buyer’s market of sorts and this has forced lenders to compete more stiffly amongst themselves for offering the best rates. So on your part; you should at least be at your diligent best to get the best possible rates.

More frequent payments

Second technique, cites Yardney, is to make payments more frequently. For instance, rather than making payments each month, borrowers should look to make mortgage repayments each fortnight. Also, you can take up a voluntary initiative to make higher mortgage repayments when the interest rates are lower.

Change of loan structure

Thirdly, you should seek a shorter loan tenure from your lender. This is especially true for those borrowers who have made a big upfront payment.

You can read the original article here.

What happens when the interest rate corrects itself?

Possibly, the only caveat to these wonderful suggestions can present itself to us when the rate corrects itself. It is all good when the cash rate is in the 2% zone, but what if the government is forced to correct the cash rate and the first impression of the correction reflects on the interest rate? Those home owners who have budgeted themselves keeping in mind these abnormally low interest rates might find themselves running for cover in the event of a steep rate hike.