Thursday, February 6, 2014
Homeowners who acquired their home through a home loan are burdened by loan expenses every month. Worrying about this heavy responsibility on a regular basis can be stressful so you might want to consider paying off your home loan early, which has a number of advantages.
Financial security and freedom
An obvious advantage to early payment of a loan is financial security and freedom. You won’t have a large expense to think of every month and this will give you leeway to put away money and invest in a business or other venture.
Having financial security and freedom can also offer peace of mind and a positive impact on your life.
The easiest way to pay off your home loan earlier is by simply paying more every month and adding this to the principal. This will help reduce your interest expenses and shorten the length of your loan. You may also inquire at your bank for refinancing options. Ask about converting your loan to one with a shorter term. You will have to pay more every month, but this will also shorten the length of your loan.
While paying off a loan early may look like paying less in the long run, there may be some hidden costs as well. Check with your bank if there are prepayment penalties and how much these are. Loans with fixed interest rates usually have high prepayment penalties.
You should also know your financial situation and potential income well. Paying off your loan early means your cash goes into your house asset. Not assessing your income stability may lead to liquidity problems later on.