Principal-Only Payments: Are They a Good Idea?
Principal-only payments are a popular option for those seeking to pay off their mortgage faster. The idea is that instead of paying the regular monthly payment, homeowners can choose to make additional principal-only payments each month in order to reduce the total balance more quickly. But before deciding to make principal-only payments it is important to consider whether they are a good idea or not.
To begin with, it is important to understand how principal-only payments work and what their benefits are compared with making regular mortgage payments. Principal-only payments go directly toward reducing the loan balance, unlike regular mortgage payments which consist of both interest and principal repayment components. This means that when making these extra repayments, you will be reducing the amount that you owe more quickly than if you were simply making your normal scheduled payment each month.
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