Jan 15, 2018

6 Tips to Avoid Mortgage Debt in 2018

According to, a monthly mortgage payment is primarily based on three factors: 1) the loan amount; 2) the interest rate on your loan; and 3) the term, or the number of years until the loan is paid off using the scheduled payment. This article will present ways to avoid mortgage debt and maintain healthy mortgage payments for 2018.

1) Learn the true cost of home ownership

Do you know all the possible costs included in home ownership? Other than the price you agreed to pay for the home, other costs include: total amount of principal and interest, monthly payments with interest, property taxes, homeowner’s insurance, mortgage insurance, ongoing furnishing and maintenance costs, monthly utility bills, and even flood insurance (depending on the area of your home). (

2) Ask if there’s a prepayment penalty

Before you start making extra payments toward your principal balance, check to see if there’s a prepayment penalty. When you prepay on your mortgage, you’re basically costing the lender money. If a lender gives you a prepayment penalty, that could equate to a percentage of a mortgage loan amount or the equivalent of a certain number of monthly interest payments ( For example, a 3% prepayment penalty on a $200,000 mortgage would cost you $6,000.

3) Make extra payments toward your principal balance

If your lender doesn’t have a prepayment penalty, it’s a good idea to start making extra payments toward your principal balance. Be sure to make a note to put the extra payments toward your actual principal, otherwise the lender may use the money to pay down interest for the next scheduled payment. (

4) Don’t extend your loan term when refinancing a mortgage loan

Before you decide to refinance a mortgage loan, look at your budget and figure out whether having a longer mortgage term makes sense. Refinancing and closing costs could cost you more money than anticipated, if you’re planning on extending your loan term.

5) Don’t leave yourself cash poor

As helpful as extra principal payments are, so is need to keep emergency cash. Throwing every extra penny at your mortgage could help get you out of debt. But if an emergency occurs and you’re out of funds, you could be forced to use your credit card to cover bills, and thus send you into debt. It’s best to have an emergency fund at all times of at least three months’ worth of expenses. (

6) Have an affordable fixed-rate deal

If you’re on a standard variable rate (SVR), you should consider every opportunity to build in some protection against future rate rises. Mortgage offers generally last six months, so keep an eye on your fixed-rate deal and when you can get a new one. Consider overpaying each month to take advantage of a relatively low interest rate and improve your equity stake in the property for when you come to remortgage (


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