Paying off a mortgage begins with understanding how much goes to paying off interest and how much goes to paying off a principal balance. Amortization is the paying off of debt in equal installments with part of the payments going to principal balance which may increase monthly and the interest payment declining monthly. Having a mortgage amortization strategy to avoid default and pay off mortgage when needed begins with properly calculating what is due and what is in your budget.
Begin by finding out how much principal is due and what is the interest rate on that principal per month as well as how much equity you have. Equity is determined by subtracting the mortgage balance from the current value of the home. Determine how long you want to take to pay your mortgage off (i.e. 20 years, 25 years, 30 years etc.). Remember, that buying a home is probably going to be the largest financial investment you make so if the use of a mortgage is needed make sure you can afford to pay it off.
If a mortgage amortization schedule is not given to you by the lender, you can create one yourself to determine the amount of interest and principal you will be paying each month. The shorter you amortization period is, the less payments you will have to make. While these payments may be higher per month, the interest is often less. The bottom line is make sure you understand your payments by asking questions of your lender and getting full details. Often it is also best to ask the lender to explain all the options available to you so you know that you are getting the loan that works best for you and one you can afford.
Lastly, if you do choose a 30 year repayment option, consider paying off as much as you can whenever you can to get the ball rolling which will also eventually reduce the amount of interest you owe and slowly get you closer to paying off that principal balance. What is the purpose of buying a home if you feel like it is never actually really yours? Make payments to ease your mind and consider this mortgage amortization strategy as a vital step in getting closer to having a home of your own.
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