Monday, March 3, 2014

Are you paying more than necessary on your mortgage?

Consumers are often swept along by the intricate advertising campaigns of banks and other lending institutions that are busy to promote the next big thing in home financing. And these campaigns always project the bank as this institution that always have the interests of the public foremost in their hearts and how they are always trying to look out for the best interest of their clients.
That is their story!
The truth is these financial institutions are in business primarily for themselves. When they sit in their fancy shareholder meetings, they do not discuss customer care programs. No sir, they are talking hard cash, profits, and how much their shares have grown. This knowledge should be no surprise; you would have done the same thing if it were your business. Why then are we so easily sucked in by their cleverly orchestrated promotion campaigns that so cleverly convey how very good the banks are for us and all the effort they put in to accommodate the public that they serve.
Paying more than necessary!
There are banks and lending institutions that promote the idea that paying more on your mortgage than are necessary are a good thing. Is this true or are there a catch somewhere that you are not told about. The idea that they are selling is that if you pay your mortgage of early you safe thousands in interest. On the surface, this certainly sounds logical and attainable, but is it effective in saving you money? The thing is with a fixed rate mortgage your mortgage are calculated over a fixed term of 20 or 30 years with the interest properly calculated over that entire period. The truth is every payment received only goes toward the current principle and the interest due. Additional payments do not go towards the loan; this money is applied to the principal that is due at the end of the loan.
The assumption
They say that you will save a lot of money because you have paid off your bond early. The truth is you would be better off to pay this additional money into a savings account or towards the college tuition of a child, where you will be the sole beneficiary of all those money paid. Because the truth is, you will have to pay the administration fees of this scheme and many institution charge you extra for this so-called benefit. However, beware, make very certain of the facts before committing yourself to any so-called money saving schemes.

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