Mortgage loans are a big burden for Russian families. Therefore, each borrower tries to repay the loan as soon as possible in order to overpay less in the form of interest. How will it be more profitable to repay the mortgage by reducing the term or the amount of the loan?
What is the best way to pay off a mortgage: by term or by amount
Mortgage loans are a big burden for Russian families. Therefore, each borrower tries to repay the loan as soon as possible in order to overpay less in the form of interest. When repaying housing loans early, credit organizations offer two ways to pay off debt. You can reduce the term of the mortgage or reduce the payment amount.
And what would be more profitable to reduce the payment or the term of the loan ?! The first thing to consider is that many domestic banks issue mortgage loans according to the annuity calculation system. This suggests that at first a large share of the payment is made up of interest on the debt, and then the main debt is paid. In case of early repayment, the terms and amount of payment must be recalculated, and most often credit organizations reserve the right to choose how the recalculation takes place.
Undoubtedly, if you are looking for a way to save money, then you need to shorten the loan term, in this case the overpayment will be less. Since the lender charges a fee for each year of using the loan, accordingly, reducing the term, payments are reduced.
Attention! With the second method of calculating the payment - differentiated, when the principal debt is paid first of all, shortening the loan term is also more profitable than reducing the amount of payment.
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Consider a partial early repayment of more than 70 thousand rubles, which will shorten the term of the home loan by a couple of months, while the amount of the payment will remain the same, but the total amount of the loan overpayment will change downward. You will see this immediately when you get your hands on the new recalculated payment schedule. By the way, for early repayment with a reduction in the term of payment, bankers require a personal visit to the bank and the signing of the amended documents.
If you have any doubts about how to recalculate the debt by the amount or due date, ask the bank employee to draw up two payment schedules. Then it will be clearly seen what is beneficial for you.
If the family's monthly budget is "bursting" from an unbearable payment, in this case it would be better to choose to reduce the payment in case of early repayment. This will allow you to feel comfortable and not save on the usual necessary things. For example, having paid 5 thousand rubles in excess of the payment, the loan term will not change, but the payment will be less.
As a result, both methods of loan repayment are convenient. It depends on what purpose the borrower is pursuing and what is best for him. Of course, he himself will decide what choice to make. Mortgages enable each person to purchase their own home, albeit not very quickly, but their own!
