When you are prepared to buy a house and are working with your lender to get a loan, you might want to evaluate an accelerated mortgage. This type of mortgage is something that helps people pay off their loans faster, and here are several things you should understand about accelerated mortgages.
What it is
An accelerated mortgage is not actually a different type of mortgage than a typical one. Instead, it refers to a different way to pay a mortgage than the usual way. With a regular mortgage, you make 12 payments a year, which amounts to one per month. With an accelerated mortgage, you pay half of your mortgage payment every two weeks. By doing this, you will be making 26 half payments per year, which is 13 full payments. Making one extra full payment will help you pay off your mortgage a lot faster than the amount of time it normally takes.
What you need to know before you do this
Before you begin using an accelerated system to pay your mortgage faster, you should talk to your lender to make sure that they accept this type of payment. If they do not, this will not work for you. If they do, you can begin using this system whenever you are ready.
How it helps you pay off your loan faster
The main reason this system helps you pay off your loan faster is due to the extra payment you make each year. Additionally, when you pay every two weeks, you will actually be reducing your principal balance faster, and this will result in paying less interest over the life of the mortgage.
Why it is safer than choosing a shorter-term loan
Using an accelerated system is a great way to handle paying a mortgage if you want to repay it faster than the 30 years it is designed for, and it is safer than choosing a 15- or 20-year loan. It is safer because you are only obligated to pay the actual mortgage payment each month. You do not have to pay the extra amount you are paying. If you ever encounter a time in life when money is tight, you can stop using the accelerated system and begin paying the regular payments.
If you are interested in buying a house, you might want to start looking into your loan options now. You can learn more about loan options by talking to a mortgage lender like Consumer First Financial.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.