| It is a simple way of reducing the home loan principal | | | | significant amount of money and make a lump |
| and saving thousands on interests. | | | | mortgage payment every 4 or 6 months in order to |
| Mortgage Prepaying | | | | reduce the principal. You will then get fewer interests |
| Mortgage prepaying consists on cancelling part or the | | | | and thus, lower monthly payments that will let you |
| total amount of the mortgage loan remaining debt. If | | | | save even more money each month. |
| the type of mortgage loan lets you pay part of the | | | | However, you cannot always save enough money to |
| principal and not only interests, then you will be saving | | | | make such payments and if you want to have any |
| money by prepaying your mortgage. | | | | reliability in your finances, you will probably want to |
| The reason why prepaying part of the principal can | | | | have an extra amount available for any unexpected |
| save you thousands of dollars is that interests are | | | | situation. |
| calculated as a percentage over the principal. If the | | | | At this point is when home equity lines of credit come |
| loan capital is reduced, the interests charged will also | | | | in handy. Since they carry low interest rates, these |
| be reduced. | | | | lines of credit are the perfect solution for solving the |
| Since the interests are the lender earnings, many | | | | problem of unexpected situations. Even if you have |
| lenders penalize these practices either by not letting | | | | not save enough money, you can turn to them in order |
| you prepay the mortgage or by charging prepaying | | | | to get extra money and make a mortgage payment |
| fees in order to discourage these practices. | | | | to keep canceling the principal. |
| Home Equity Lines of Credit | | | | You will then destine the extra money to repay the |
| The difference between the propertys value and the | | | | amount you borrowed from your home equity line of |
| remaining of the home loan debt constitutes equity. | | | | credit. Moreover, if anything unexpected comes to |
| And the equity you have build on your home since the | | | | happen you will have more cash available on your line |
| mortgage loan was agreed, can be used to obtain | | | | of credit and will not have to apply for a loan and wait |
| further finance in the form of a home equity loan or | | | | to be approved. |
| line of credit. | | | | In order to see if this is the solution for you, you need |
| A home equity line of credit is guaranteed with the | | | | to go through your mortgage loan terms and check if |
| same asset as the mortgage loan. This line of credit | | | | there are any penalizations for prepaying your home |
| usually carries lower variable interest rates which | | | | loan. Then compare the amount you would save on |
| allows you take advantage of good market conditions | | | | interests with the prepaying fees and the home equity |
| and get money at probably the lowest rates on the | | | | line of credit costs. If the overall transaction saves you |
| private financial market. | | | | at least a couple of thousands and reduces your |
| Combining Both | | | | mortgage length, then seize the opportunity and start |
| Prepaying itself lets you save thousands of dollars in | | | | prepaying your home loan. |
| interests. But in order to do so you need to save a | | | | |