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Home loan repayment options

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  1. Algeo41 Algeo41 is offline

    Posts: 1
    Joined: Apr 09

    Apr 2nd, 2009 (4/2/2009 1:39am)

    Employment rate in Kerala is expected to grow at a fast rate for the next 5 -10 years. This is due to have a further positive effect on the real estate of the state especially in the cities like Cochin and Trivandrum where the employment opportunities will be concentrated. Buying a Kerala apartment can be the most important investment for anyone. There are number of factors to consider while investing in residential property. The choice of home loans is one such. There are different financial institutions offering different schemes. The interest rates on the loans are a major consideration while choosing a particular scheme or institution. A fixed rate is one where the interest rate is the same throughout the tenure of the loan. There are also products where ‘fixed’ rate remains fixed for a particular time span. Fixed rate loans are always preferable if the interest rates are slated to go up in the near future. It can also make budgeting easier due to the fact that all payments should for the same amount. However, fixed rates have their own limitations. They attract higher premium compared to floating rates. If you have plans to borrow with repayment tenure of 20 years, as there is pre-pay option, in a few years, you should go for the fixed rate. However, if you can repay the loan within 6 months or so, you are advised to go with floating rate. Floating rate loans are sensible when interest rates are declining. They are closely associated with the market rate and are therefore subject to change at periodical intervals. Banks review their floating rates once every quarter sometimes even monthly. The period can vary across HFCs. Often with a floating rate, there is also longer tenure, which translates to financial commitment for a long term. Therefore, floating rate loans demand a strong and well thought out financial planning.
  2. ilovescotch ilovescotch is offline Mod of teh xfers

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    Apr 2nd, 2009 (4/2/2009 1:41am) in reply to Algeo41

    I just see a clusterfuck of letters, I think your keyboard is missing this:

  3. Chazmental Chazmental is offline Thief

    Henderson, NV
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    Apr 2nd, 2009 (4/2/2009 1:45am) in reply to ilovescotch

  4. darkpoker12 darkpoker12 is offline

    Irvine, CA
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    Apr 2nd, 2009 (4/2/2009 1:49am) in reply to Chazmental

     
    Originally Posted by Chazmental View Post


    loooooooooooooooooooooooooooooooooooooooooooooool
  5. Leet8s Leet8s is offline usausausausausa

    New York City, NY
    United States

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    Apr 2nd, 2009 (4/2/2009 1:55am) in reply to ilovescotch

    I'm sure resilient knows exactly what to do but I would probably lock in a fixed-rate at these retardedly low rates. In addition, try to pay off as much a percentage of the total mortgage value upfront. You can whack out the most NPV of your mortgage by paying now as opposed to making monthly payments for 20-30 years. Most of the future payments simply goes to paying off the interest instead of the principal.

    A mortgage is simply an annuity.

    Net Present Value = (Monthly Mortgage Payment / Interest Rate) * (1-[(1/((1+i)^T)]

    i = Interest Rate (monthly)

    T = 12 * Years on mortgage.

    If you know the value of your mortgage, you can solve for the monthly mortgage payment. In addition, do monthly mortgage payment * number of payments, and subtract out the NPV and you can see how much interest you pay. The interest on a 30-year mortgage is quite large! All though when you take the NPV of all your payments it equals current mortgage value but it sure doesn't seem that way.
     
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