8 ways to quickly pay off a mortgage - schemes and methods to pay off a loan ahead of schedule

If a house, apartment or other real estate is in a mortgage, and funds can be allocated from the family budget in order to pay part or all of the debt ahead of schedule, you should know how to do everything right so that the bank is satisfied with the cooperation, and the person saves on paying interest. Recommendations on how to quickly pay off a mortgage loan that will be given will help you find, if necessary, a suitable way out of this situation.

Is it possible to pay off a mortgage early?

The condition is regulated by the loan agreement. Most banks and financial institutions provide such an opportunity. You can pay off a mortgage loan ahead of schedule in full and in parts without interest, commissions, penalties, quickly and at minimal cost. Some organizations have certain limits on the amount or other conditions. So, for example, the lender has the right to require the borrower to report in writing or verbally a few days before the end of the payment period that he plans to repay the mortgage ahead of schedule.

In any case, the conditions for changing the installment schedule in order to quickly close the mortgage are discussed individually before drawing up a loan agreement. It should clearly spell out the clauses regulating the procedure, process and possibility of repaying a mortgage loan ahead of schedule, the minimum and maximum monthly payment that the borrower is entitled to pay additionally.

How to pay off your mortgage quickly

Early repayment of a mortgage loan guarantees a reduction in the amount of overpayment, saving own funds and reducing the loan term. The faster the borrower manages to pay off the debt, the less the overpayment will be. Most debtors take out a mortgage loan for up to 15, 20 or 30 years, but pay it off much faster. For those citizens who take into account various force majeure circumstances (a decrease in wages, the emergence of new financial obligations and problems that need to be resolved quickly, unplanned purchases) this is a normal practice.

Early repayment of a mortgage loan can be full or partial. Full repayment is understood as the payment of the entire amount of the debt at once. In case of partial repayment, the borrower, in addition to the mandatory monthly installment, makes additional funds, their amount is not limited by specific requirements. You can quickly pay off the debt using maternity capital, insurance, personal funds, subsidies, etc.

In accordance with the current legislation, citizens of the Russian Federation can partially and fully repay their loans. To do this, they must notify the bank of their intention 30 days (another period is indicated in the contract) before the planned repayment date. Interest is paid only for the actual period of use of borrowed funds. The application can be submitted orally or in writing, by phone or online.

After a partial repayment of the principal, the bank issues a new installment schedule to the borrower, according to which the monthly payment and interest are reduced. If the debtor managed to quickly pay off the debt in full, then a document is issued indicating that the loan is closed. This help will protect against possible problems in the future. It becomes proof that the debtor has fulfilled all obligations to the bank.

Payment reduction

One of the 8 effective ways to pay off your mortgage quickly is to lower your monthly loan installment. It is recommended to resort to it to borrowers who are not sure that they can always collect the required amount on time to pay off the monthly installment. You can reduce the amount of payment under a mortgage lending agreement if:

• the borrower has a stable job, but wants to play it safe;
• there is no 100% confidence in their financial situation;
• the financial situation is unstable - earnings periodically fall and increase, the debtor can quickly earn a large monetary reward.

By reducing the amount of the installment, the borrower will not significantly reduce the amount of the overpayment, but will reduce the financial burden, protect itself from delay, since it will be able to pay the mandatory monthly installment in any situation, and this is already an important and significant advantage. The loan period remains the same in the event of a reduction in the amount of the installment, as well as the interest rate, debt repayment scheme, etc.

To reduce the amount of payment, it is required to periodically or constantly make an additional monthly contribution in addition to the main monthly payment. If the borrower has free money that will help quickly repay the loan, he must contact the bank or other financial institution, inform about his intention. You should always focus on the contract. It specifies all the nuances of the procedure. An equally effective way to resolve this issue is to consult with a bank employee: he will provide all the required information about the service.

Reducing the loan term

If there is no point in reducing the amount of the installment, then you can use another of 8 ways to quickly pay off your mortgage. Experts recommend reducing the loan term in such cases:

• when the borrower has a stable good income, in which he is 100% sure;
• when it is possible to soon receive the necessary monetary compensation, which will allow you to fully cover the debt (the person has not yet managed to sell the old apartment, but cannot delay the move, he has to apply for a mortgage loan, which he will immediately close when he sells his property).

In such cases, you can safely make an additional contribution to repay the loan and significantly reduce the term of the loan. But do not forget that the material burden should be feasible. The advantage of reducing the loan term is obvious. This method minimizes the overpayment. Its disadvantage is the monthly installments that are unbearable for most debtors.

Types of loan payments

Before you take out a mortgage, you have to consider many different nuances. One of the first is the type of loan installment you choose. It is annuity and differentiated. Each of them has its pros and cons, each type has a huge impact on the efficiency of early repayment of the loan. Therefore, if it is planned to close the mortgage ahead of time, then this nuance requires close attention.

The type of payment plays an important role in mortgage lending because:

• it determines according to which scheme interest will be accrued;
• it affects the amount of the monthly installment;
• it depends on him how the “body of the loan” will be distributed for its entire period.

If we talk about the early repayment of a loan, then the situation is more complicated, and in order to understand which strategy is best to choose for the fastest repayment of a loan, it is required to individually carry out calculations, taking into account the term, loan size, method of interest calculation, rate, financial capabilities of the borrower, etc. There is no single and correct advice on which type of payment to choose. It all depends on the specific conditions and situation.

Annuity

This type of contribution involves the division of the principal debt and accrued interest into equal parts. In other words, the debtor must pay the same payment every month throughout the entire loan period. As a rule, financial institutions provide clients with a schedule that indicates the procedure for paying annuity contributions. But if you wish, you can carry out all the calculations yourself.

The amount of monthly annuity mortgage payments is calculated by the formula - х = S * (Р + (Р/(1+Р)N-1)), where х is the amount of the monthly installment, N is the loan term in months, Р is the annual monthly interest bid. To calculate the percentage component of the installment in question, it is required to multiply the loan balance for the specified period by the annual interest rate, and divide the resulting figure by 12 months.

The following formula is used - Pn = Sn * P / 12, where Sn is the remaining debt, Pn is the amount of accrued interest on the mortgage. That part of the monthly payment, which will allow you to pay off the principal on the mortgage, is calculated by the formula - s = x - pn, where s is the desired indicator, x is the amount of the monthly mortgage installment, pn is the interest set at the time of the nth payment.

To find out how much is spent on paying off the principal, the monthly payment is reduced by the accrued interest. Since the value of s depends on previous mortgage payments, it is calculated in a sequential way for each month, starting from the first. The accuracy of the resulting indicator depends on the accuracy of the calculations. A special loan calculator helps to facilitate the task of making calculations.

Annuity implies the payment at the initial stages of 80-90% of the accrued interest on the loan, only 10-20% of the total amount paid is used to pay the principal debt. Choosing the considered method of repaying the loan, the debtor first pays interest, and only then the principal debt. According to experts, an annuity is beneficial first to the creditor, and only then to the debtor.

The advantages of this scheme are as follows:

• the possibility of obtaining a larger loan;
• sparing burden on the debtor at the initial stages;
• ease of repayment of the loan due to the fact that the monthly payments are fixed, as a result - the elimination of the possibility of accidental indebtedness;
• convenient budget planning;
• longer loan term.

The disadvantages of the annuity scheme include a large overpayment and a constant amount of contributions paid throughout the entire maturity of the mortgage. If we compare the annuity and the differentiated scheme, then we can say without making calculations that the loan will cost more to the debtor who chose the first method of repaying the principal debt, since the loan body decreases more slowly, and interest is accrued on it.

The debtor knows what payment he must make each month, plans his budget and anticipates all possible problems in advance in order to avoid penalties that a bank or other financial institution applies in case of late payment of a monthly installment. But it is much more convenient when the amount of mandatory payments on a mortgage loan is gradually reduced.

The annuity scheme is beneficial primarily for creditors. They get the maximum return on the loan. At the first stages, the debtor repays mainly the interest for the use of the funds taken, as a result - a slow decrease in the amount of the principal debt and a more significant overpayment on the mortgage loan, in order to reduce it, there is only one way out - to exercise the right to full or partial early repayment of the debt. How to do this - by reducing the monthly payment or the loan term - the debtor decides.

Differentiated

This method of mortgage repayment is called commercial or classic. It provides for the calculation of interest on the balance of the debt. Translated from English, differentiate means to distinguish, to distinguish - and the size of each subsequent monthly mortgage payment is constantly different from the previous one. This method of loan repayment obliges the debtor to pay the body of the deputy in equal parts and the interest that is charged on the residual amount, it decreases every month, which causes a decrease in their value.

Advantages of a differentiated way in which you can pay off a mortgage:

• a small overpayment on a loan compared to an annuity due to the fact that the body of the loan is gradually decreasing, and with it the amount of accrued interest;
• gradual reduction of the financial burden on the debtor by reducing monthly payments;
• a simple and understandable principle of calculation, which even a child masters.

The disadvantages of the differentiated method include:

• relatively high first payments;
• a smaller loan amount compared to that which can be obtained by choosing an annuity;
• always different amounts of payments, the need for constant reconciliation with the payment schedule chosen by the bank or other financial institution.

This method of paying a mortgage is more beneficial for borrowers. Even if the first payments on the loan are significant, the overpayment is 1.5-2 times less compared to the annuity. A differentiated loan can be partially or fully repaid at any convenient time. The debtor chooses the way how it is profitable and fast to do it. Experts recommend resorting to shortening the loan term at the last stages of mortgage repayment, to reducing the amount of payments - at first, in order to minimize the amount of the mandatory payment.

Conditions for early repayment of a mortgage loan

To quickly and profitably pay off a mortgage, you will need not only additional financial resources. A person must know his rights and obligations, be legally savvy in matters, be able, if necessary, to protect his interests in court. The conditions for early repayment of borrowed funds are prescribed in the loan agreement and may be different in each specific case.

According to the law, citizens of the Russian Federation can pay off all or part of their mortgage loans without any obstacles. To do this, you must notify the bank or other financial institution within the prescribed period. The borrower must also take into account the terms of the agreement concluded with the lender. It prescribes all the nuances of the premature return of borrowed funds:

• threshold (minimum) amount of early payment;
• the method and term for notifying the financial institution of the desire to quickly pay off the mortgage in full or reduce the amount of payments;
• the presence of commissions, fines, deductions, and other sanctions for recalculating the loan payment schedule.

The loan agreement may not include the conditions for early repayment of the loan. In this case, the borrower must discuss this issue with the bank or other financial institution, document it in order to avoid problems in the future. If it becomes possible to quickly pay off the mortgage in the future, and the agreement does not provide for the condition of early repayment, the bank or organization has the right to refuse the client or demand an additional commission.

Borrower's procedure

In order to quickly pay off a mortgage loan, the debtor undertakes:

• notify the financial institution of the intention to contribute additional funds (the application indicates the estimated amount of the contribution);
• on a certain day, go to a financial institution to reissue documents and make payment in cash or non-cash;
• if the additional contribution helped to pay the rest of the debt, take a certificate stating that the mortgage lending agreement is closed;
• issue all documents in the relevant state authorities confirming the fact that the borrower is the owner of the residential property.

8 ways to pay off your mortgage faster

A loan is a significant financial burden, so every debtor tries in every possible way to get rid of it as soon as possible. There are many ways to quickly pay off a debt to a bank or other institution - these are personal savings, maternity capital, tax deductions, refinancing, special social programs, increasing the frequency of payments made, reducing credit card expenses in favor of repaying a loan, subsidies.

Own funds and savings

One of the 8 ways to pay off your mortgage quickly is to use personal savings. Its advantages:

• the maximum reduction in the loan term, the ability to quickly relieve oneself of the financial burden;
• minimum loan repayment;
• a quick opportunity to become a full owner of real estate purchased on credit.

The only drawback of this method is the need for strict budget planning. The debtor, giving away his savings, loses the only insurance that, if necessary, will help solve unforeseen material problems that have arisen.

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Maternal capital

This method, which allows you to quickly pay off the debt, is suitable for parents and guardians who have two or more children. They can receive monetary compensation in the form of a certificate for the improvement of living conditions, misuse of these funds is not allowed. A citizen who has the right to receive maternity capital applies to the Pension Fund and the bank. Institutions issue permission to use the certificate to repay a mortgage loan. The debtor gives the certificate and permission to the creditor. The amount of compensation is 400 thousand rubles.

Tax deduction

Home loan holders are entitled to a tax deduction on the value of the property and interest paid to the financial institution. Its size is 13% of the amount of an apartment or house purchased on credit, but cannot exceed 2 million rubles. To receive monetary compensation, you need to contact the tax office or the accounting department of the employing company.

Loan refinancing

If the borrower finds a more profitable program, he can exercise the right to refinance it - transfer it to another credit institution. The advantages of this method:

• significant savings;
• reduction in the amount of the overpayment;
• the ability to choose a more suitable loan program in order to improve conditions.

The transfer of a mortgage loan from one organization to another provides for the removal of all obligations of the debtor to the current creditor and the transfer of collateral to a new institution. At the same time, a new mortgage agreement is concluded, which specifies a completely different interest rate, scheme, loan term, the possibility of debt restructuring, etc. Favorable conditions for mortgage lending are offered by Sberbank.

Increasing the frequency of payments

If you can allocate funds from income to repay the loan ahead of schedule, you can make them several times a month. This will shorten the loan period and minimize the overpayment. It is recommended to increase the frequency of repayments when the borrower has additional income, when extra money has appeared as a result of the sale of personal property, etc.

Decrease in credit card expenses in favor of paying off mortgage debt

If a person uses a credit card with a certain limit, then these funds can be used to pay off a mortgage loan. This method does not require any additional investments on the part of the borrower, while significant savings on interest are possible. The credit card must be absolutely free, with no annual service fees.

Subsidies under existing programs for certain categories of citizens

Young and large families, military personnel, the disabled, orphans, single mothers, doctors, scientists, teachers, civil servants, state employees, etc. can receive gratuitous material state assistance for partial repayment of a mortgage loan. Its value directly depends on the official income of the whole family. There are several grant programs. Each person chooses the appropriate option for himself.

social mortgage

To improve the housing situation for people who belong to vulnerable segments of the population, the state has developed special programs. They involve partial payment for housing purchased on credit at the expense of budgetary funds, a reduction in interest rates, the provision of certain benefits in the form of monetary compensation of principal and interest, etc.

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