Is an early mortgage payoff in your best interest?

Nowadays, although real estate necessary for people, the unstable market of real estate still makes most people worry, especially the issue of the mortgage. Should the mortgage be repaid in advance, and what are the benefits in advance? However, some people will choose to repay the mortgage in advance, and some people will repay the mortgage on the deadline for repayment of the mortgage. So, does the time of repayment of the mortgage have any effect on the borrower?

1. We must consider the current mortgage interest rate.

Generally speaking, the mortgage interest rate is not fixed and will be adjusted according to the prevailing interest rate level. In recent years, due to repeated interest rate cuts, the basic interest rate on housing loans has dropped significantly. For example, some fund loans take into account that the current provident fund loan interest rate of more than five years is 3.25%, the commercial loan benchmark interest rate is 4.9%, plus discounts, interest rates can reach very low levels. From a trade-off perspective, if there is more money, it is more cost-effective to cover the cost of housing loans through multiple investment channels.

2. It is necessary to consider what the repayment method is adopted.

At present, there are two most common repayment methods, namely equal principal & interest, and equal principal. It should be noted that before deciding whether to repay the mortgage in advance, it also depends on whether there is an agreement in the loan contract to pay liquidated damages. Why are banks not welcoming early repayments?

3. Commercial interests may be relatively unwelcome.

As a commercial property, housing loans take interest as the profit point. Banks also provide housing loan funds for personal home purchase business to obtain interest from them. However, the loan period chosen by ordinary home buyers when purchasing real estate is determined by individuals. Based on the selection of loan term, for different interest rates, the following figure (the loan interest rate performed on 2015-10-24): the interest rate within six months (including six months) is 4.35%; from six months to one year (including One year) 4.35%; the interest rate for a three-year period (including three years) is 4.75%; the interest rate for three to five years (inclusive) is 4.75%; the interest rate for more than five years is 4.9%.

The longer the loan period chosen by the house buyer, the more interest the bank collects, and the prepayment can be based on the agreement in the loan contract. “__ months later”, you can propose to repay part or all of the loan in advance for the first time; whichever comes first!