Congratulations on finding your home, having your offer accepted, and getting your loan approved by the bank!
Now you’ll have some critical decisions to make on the journey to the most important step of all – actually paying your mortgage.
Of course, you want to choose a mortgage that offers payments that are feasible for you to make and still live your life but will also pay down the mortgage efficiently. The most important part to remember is that you’re not just paying back the amount you borrowed to fund the property purchase, but to pay the mortgage interest as well.
So, understanding how much you’re paying in interest and having strategies to reduce the total interest as much as possible are key.
How to pay your mortgage off? Choose your interest rate type wisely
Variable interest rate:
With a variable rate, the rate of interest and payment can go up or down based on the marketplace and other factors like rates in Europe, the Ireland banks etc. A variable rate saves you money but comes with risk. It’s best to use it if you anticipate that rates will fall, you will make more money, want to pay off the loan in one sum, or just want flexibility.
However, it does come with risk since you’re at the mercy of the banks and the property market so your payment could go up any moment. But you can choose to fix a variable rate at any time.
Fixed interest rate:
Fixed loans offer more safety and security since your interest rate – and therefore payment – are fixed or locked in for a certain amount of time. The borrower can usually choose a period of one, three, five or 10 years, and there’s even a bank now offering 20-year fixed loans.
That security comes with a drawback since it may be harder to pay extra or pay off the loan in big sums or all at once. Then, there is the question of taking a Cash Back loan.
You may want this to get hold with the down payment or even funds to buy furniture and such. The good news is that you can really analyse a cash back loan, how much you pay, etc. on some great mortgage calculator websites.
Remember that the whole objective is to reduce the total amount of mortgage interest to help pay your mortgage off early, while still having a monthly payment that is feasible and reasonable to pay.
One thing to note is that if you are looking at a new property, you’ll make a decision at the time of the loan offer. But, if your home takes 6 to 9 months to build, you’ll be able to review your loan options about 2 to 3 months out to see if it is still the best loan for you.
As always, contact me any time if you need help or to talk about the best loan rate for you!
For more personalised advice on ‘How to pay a mortgage off early’ contact JC Mortgages