While loan amortizations may seem easy to understand, they can also be incredibly nuanced. At Evoque Lending, we’re here to break them down for you! Here are Four loan amortization tips to keep in mind when it comes to taking control of your mortgage:
1. Choose a 15-year mortgage if you can afford it: a 30-year fixed rate is typically more popular amongst homeowners, but not everyone realizes that the amount of interest you pay is significantly higher over the course of the loan.
2. Utilize accelerated amortization: by accelerating your amortization, you pay down your debt more quickly, your home’s equity increases at a faster rate, and the interest you pay over the life of the loan is significantly lower.
3. Attack your principal early in the loan: while this may sound overwhelming, chipping away at your principal early on in your loan allows you to skip over some of your largest interest payments.
4. Choose a house you can afford: Seems obvious, right? However, affordability isn’t a black and white issue. Don’t take out any loans that are larger than you need — this will help you in the long run!
The key to making loan amortization work for you is to first understand how it functions and where your payments are distributed; then you can plan out the perfect strategy that allows you to fully optimize your homeownership.