Payment Schedules

As far as the conditions or requisites for payment schedules for credits against property are concerned, it must be mentioned that there are various alternates available in the mortgage market. The options include weekly payments (making 52 payments every year), bi-weekly payments (making 26 payments annually), semi-monthly (making 24 payments each year), monthly payments (making 12 payments in a year) and various other schedules depending on what the mortgagor and the mortgagee agree mutually. Each repayment made to the lender for the mortgage is normally a combination of the principal amount and interest charges. Although the payment schedules may be worked out in any variation, conventionally the loans are repaid or amortized on the basis of making a regular payment each month. It is common knowledge that the more often a borrower repays the loan, the lesser amount of interest he or she has to pay. In addition, more frequent payments also mean that the credit will be cleared earlier than the stipulated time frame.

There are mortgagees who offer their clients or the borrowers the opportunity to make an increased monthly payment once in a year. In such cases, the borrower is allowed to make an additional payment of 10 per cent to 20 per cent in one month every year with a view to lower their interest amount payment as well as to reduce the duration of the credit. Again, some mortgagees allow the borrowers to double the amount of their monthly payments with the same purpose. In fact, there are numerous payment schedule options available in the mortgage market and hence, it is advisable that before obtaining a mortgage one should undertake a methodical research on the subject and find what suits his or her requirements best.

Here is a word of caution. If a borrower is making payments more often than a monthly payment schedule, he or she needs to be extra careful. In this case the borrower should insist that the mortgagee provides him or her free spreadsheet explaining how they would gain by making more frequent payments. There may be instances where the lender's mode of calculating the payment schedule will not benefit the borrower in any manner no matter how frequently they repay the loan amount. It is possible that the borrower will not be able to save any money even if he or she makes weekly payments to the mortgagee. Therefore, it is essential that a borrower ensures that making more frequent payments will not only save them sufficient money on amount of the total interest on the credit, but also clear up their loans sooner. For instance, making a weekly or bi-weekly payment will help to repay a mortgage amortized for 25 years, some 4.5 years earlier.

To Top