I didn’t know whether to reduce the payment or the term if I paid back my mortgage: this is how I found the best option

Throughout our lives, it is normal that we have to face various issues related to housing. One of the first questions arises when we consider the option of renting or choosing to buy the property. If we choose this second option, most people have to spend time analyzing the market in order to find the mortgage loan that best suits their economic reality.

As soon as we achieve it and get older, we may be able to pay off our mortgage. A situation that raises another question: Do we reduce the number of remaining shares or take advantage of reduce the monthly fee? It is what is called early partial repayment and it can have a huge impact on our economy.

What a difference there is

If we choose tax reduction, We will keep the repayment period, but pay a lower installment each month. That is, we are going to finish paying the mortgage when we were planning, but sending less monthly money. This route can be interesting if we want our monthly payment to be smaller and have less impact on the money we earn each month, however, there is a disadvantage there the interest will not decrease as much as we would like.

In a case amortize the term, We will keep the size of the installments, but reduce the time remaining until the entire loan is paid off. That is, we finish before we pay it. It is important to consider this option, because by reducing the repayment period, we also pay a lower amount of interest, so the savings will be greater.

How to make a decision

Once we know the differences between reduce the fee or term, It is time to understand which option is best according to our specific situation. To avoid mistakes, this calculator This is one of the best tools we can find on the web.

The only thing we have to do is get to it and enter all data asked about our mortgage. That is to say: the outstanding principal, the amount we want to depreciate, the remaining mortgage years and the interest rate we pay. Once all this information has been entered, we must click on the “See the result” button located at the bottom of the page.

The results allow us to find out what the difference is between reduce the fee or term. For the example we have given, and which you can consult above, it is more profitable to reduce the date. However, in your particular case that difference may not be that great or a reduction in the fee may be more favorable. Follow the data you can pull from your own bank application that you have connected to the mortgage and filled in the data as accurately as possible so that the result is as faithful as possible to the truth.