Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can provide you with substantial savings over the life of your mortgage. The second reason that these options are so popular is that if your employer on a weekly pays you or bi-weekly basis you can simplify your budgeting by making the payment line up with the way you are paid.
Making Extra payments
Paying additional amounts on your mortgage can provide a big interest saving over time. When we select a mortgage company, we look for privilege payments options. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100,000 mortgage. It is important that the privilege payment also be flexible to allow you to make smaller payments on the mortgage, as often as you wish. An extra $1,000 paid periodically on a mortgage can help you become mortgage free faster.
Advantages of Bigger Down Payments
The larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to over extend yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
Short Term Rates vs. Long Term Rates
The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can result in savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always hold true, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of a variable rate mortgage is the strong potential for interest rate savings. The down side is that there is no guarantee that interest rates will remain low. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Consider rate projections and make sure you involve an expert when you are making this decision.