After 10 years of marriage, I’m still enjoying living in the first home I moved into with my husband. Buying a first home can be one of the most exciting events in a person’s life. Before making this important expenditure, people need to first sit down and determine how they will successfully finance it. After all, a home will likely be the most expensive purchase you make in your life. Talk to a loan officer and determine how much money you can reasonably borrow. Then, decide how much money you want to use as a down payment. You also must decide how many years you will finance your home for. On this blog, you will learn about the process of buying a first home with a loan.
There are several reasons why homeowners may want to repay their home loan early. The most common reason for early repayment is to pay a lower overall amount of interest, thus saving money. But some people also want to repay their loan early because they simply don't want to deal with a monthly payment anymore. Whatever your reason for wanting to repay your loan early, there are some things you should take into consideration when applying for your loan and when repaying it.
Is there a minimum loan length?
Many loans have a minimum amount of time before you can repay the loan in full. For example, you may have to make payments for a year before you can make extra payments on the principal balance of your loan.
What are the early re-payment fees?
Some loans allow you to make early payments or repay your loan in full without any additional fees. Other loans may charge you a small percentage of the loan or a flat fee for repaying your loan early. If you think you might want to repay your loan early, it is important to negotiate these terms when you apply for your loan.
Are you eligible for a graduated payment scheme?
Graduated payment schemes start with low monthly payments that slowly increase over the life of your loan. This was originally popular with student loans but is also available with some home loans. The idea is that your income will increase as you gain experience and so you will be able to make higher payments. Graduated payment schemes can help save money by shortening the term of your loan while giving you a concrete repayment plan.
How are early payments applied?
If you want to repay a portion of your loan as opposed to the full amount, it is important you discuss how the lender will apply your payment. Some lenders automatically credit your account with advance payments as opposed to applying the early payment directly to your principal balance. Make sure you let your lender know you want your early payment applied to the principal balance so you get the most financial benefit from your prepayment.
When repaying a home loan early, it is important to make sure it does not adversely affect your overall finances. You may also want to discuss refinancing and a recalculation of interest rates with your lender as other options to early repayment.
For more information on home loans and paying early, reach out to a local loan lender.