A big boost in home ownership over the past 20 years implies that people have been afflicted with debts due mortgage refinance. A mortgage is always a huge and life long commitment that can stretch into a person's retirement years. There is impelling evidence that mortgage refinance loan can run into couple of generations in some countries. For instance, father buys a home for himself and the payment is only completed by the grand children.
Good news is that there are some ways to reduce one's monthly amortization with respect of a mortgage refinance loan. Lower monthly amortization can mean an increase in one's disposable income. Bigger disposable income, on the other hand, helps to improve one's quality of life. But with some smart tips that will be discussed in this article, better and improved quality of life can be obtained in ways other than opting for a bigger disposable income.
In the absence of switching lenders on a daily basis, one can switch a mortgage refinance loan between different lenders. The purpose of switching is to take advantage of the best available deal. For instance, if Bank of America is offering a discounted deal at the introductory rate of 2.99% fixed for 3 years, the normal arrangement is that the interest rate reverts back to the standard variable rate at the end of the initial 3-year discounted period. If the savings one accrues by means of this special discounted deal translates, for instance, into $3,000 per year, one has the option of reducing the total mortgage refinance loan by $3,000 by making a lump sum payment $3,000 to the lender at the end of the year. This strategy effectively slashes off the total mortgage loan. In the example, one can effectively slash $9,000 from the total mortgage refinance loan over three years.
By the end of that three year special deal, the smart tip that is highly recommended is to look for some other lender with at least a similar, but hopefully a better, deal and simply switch the mortgage scheme. The nice thing about this strategy is that switching lenders does not cost any money. Most lenders typically cover all the switching costs. With a fresh 3-year discounted deal, another $9,000 savings can be obtained. Iterating this strategy over the entire duration of a mortgage, the savings one can only imagine the amount of savings that can be generated.
The total savings that can be extracted from a discounted deal over 4 years is equivalent to two years of mortgage amortization. Therefore, over 20 years of switching between lenders one will cut 10 years off the total mortgage payment.
There also exist deals like one-account, which offer the chance to pay mortgage interest on a daily basis. Smaller payments are possible with one-accounts due to change in financial circumstances. The distinct advantage of one-account is its total flexibility, which allows one to make higher payments towards the mortgage debt. An extra payment of $10, $20 or $40 per month, can approximately reduce one's total mortgage by as much as 10 years.
Flexible mortgage, on the contrary, does not need to be switched between lenders every three years. Thus, one is spared off the hassle of switching between lenders. Choice to make lower amortizations is allowed but if one wants to pay mortgage off early, then pay a bigger amortization than required.
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