If you have accumulated a greater amount of money, you may want to consider settling your mortgage if you have one. Here we will go through a bit of what applies to you who want to settle a mortgage as there are slightly different things that apply depending on whether the loan is tied or not.
Right decision or not to settle your mortgage
Firstly, you should consider whether it is the right decision or not to settle your mortgage. Generally, it can be said that any other debts should be paid off before, as these normally have a higher interest rate than a mortgage. Then you should also make a decision where you consider which way the money is best to be used. For a mortgage, the interest rate is often not very high, and if you look at, for example, the average return on the stock exchange in the slightly longer term, it is higher than the interest rate for the mortgage.
Economical not to settle the mortgage
This means that it may be more economical not to settle the mortgage, but instead invest the money. However, investing always involves taking a risk, because unfortunately it can be such that the value does not rise or even go down on the shares, funds, etc. If you choose to repay your loan, you at least know that you have made an investment that will provide a safe return. Because it is possible to count the cost that you would otherwise have paid in interest as a return.
The choice for you is thus between a safe but slightly smaller return (amortize / settle your mortgage) or to invest the money on other investments such as shares instead and try to take home a bigger profit, albeit with a greater risk.
What you choose to do must depend on your situation, what you feel comfortable with, in case you think you have some good investment options besides solving your mortgage and so on. Both options can have their advantages and it is mostly about what you believe in and what feels good. Here, no matter what you choose, we will explain a little what happens if you want to settle a mortgage that has a fixed interest rate and one that has a variable interest rate.
Loan mortgages with variable interest rates
The vast majority have mortgages with variable interest rates (three-month interest rates) and this means that most of them also have more flexibility in settling their loans if they wish. For a mortgage with a variable interest rate, you can settle almost whenever you want, without it costing you anything extra at all. What you really just need to do is contact your lender to hear how to deposit the money to them.
Loan mortgages with fixed interest rates
If you have tied up your mortgage, it is not really as easy to solve it without any extra costs. Your chance to pay off the entire loan without it certainly costing you anything is to do so when the maturity period expires. The bonding time that you normally have chosen yourself and which extends between 1 – 10 years.
If you want to redeem the loan during the term of the term, the risk is that you will have to pay something called interest rate compensation. In short, this is a reimbursement to the lender for the costs that you will have for your loan even after you have settled it. You can always settle even a bond, but there is a risk that it is not a particularly rewarding one.
To find out if it is a good idea or not to settle your bond loan, the tip is that you contact your lender and simply check with them what the cost would be when you redeem the loan. If you then decide to settle the loan, the lender will tell you exactly what you need to do.