Amortize fee or term of a mortgage

Amortize fee or term of a mortgage
When you have some money saved up and are also making a mortgage loan payment every month, you have the dilemma of deciding whether to use this savings to partially pay off the mortgage, that is, use the saved money to cancel part of your debt with the bank.
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By making an extra one-time payment towards the mortgage (in addition to the monthly installments), you can reduce either the length of the repayment period or the amount of the monthly installments you are paying. Below the advantages and drawbacks of either reducing the installments or the repayment period are analyzed.

Reducing either installments or repayment period

By reducing the amount of the installments, the monthly payments you are making will be easier to manage. Partially paying off the loan will also reduce the total amount of the interest you will have to pay over the life of the loan. However, the repayment period for the loan will not change.

If you reduce the repayment period you decrease the number of installments to be paid on the loan, which additionally ensures more economic benefit since less interest is paid than if the installment amount is reduced. The drawback here is that the monthly installment does not go down and you continue paying the same amount for the entire life of the loan.

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When the installment amount is reduced you will have a lower monthly installment for the rest of the life of the loan, with the benefit of being able to make the subsequent installment payments more easily.

If you reduce the repayment period, you will finish paying off the loan more quickly, paying fewer installments overall and reducing interest costs, but you must continue to pay installments of the same amount.

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