Finance & Mortgage

What Causes You To Overpay Your Mortgage?

With how the economy is going right now, an increase in home prices is inevitable and that goes as well with increase in mortgage rates. When it comes to paying home mortgage there are a lot of people who have the tendency to overpay it because they are now more cautious with their home loans.

According to CNBC, Craig Strent, the CEO of Apex Home Loans, said that it depends with the person's personality. He said, "Some people are just risk averse, but how much is your risk aversion worth?" That is a good question to consider.

As per Mortgage Bankers Association, majority of mortgage applicants prefer fixed-rate loans. While the adjustable-rate mortgages (ARMs), which is fixed up to 10 years before an interest rate will be added up on it, is no longer popular because they were associated with high-risk lending which resulted to U.S. worst housing crash. And with that, many people are more cautious and so they to overpay their mortgages.

Mark Zandi, the chief economist at Moody's Analytics, said that "I think it's just fear and the nightmare, I mean, you remember the exploding subprime adjustable-rate mortgage."

He then added, "That was at top of mind just a few years ago, and so it's going to take a while before people really get over their fear and buy into the idea that an ARM might be a good deal for them."

But with today's adjustable rate loans and the new mortgage regulations provided by the Consumer Financial Protection Bureau then it is possible to reconsider if there is still a need to overpay home mortgage.

It is normal to be cautious but it is also important to consider other factors that might be affected if the mortgage is being paid off earlier than planned.

It may seem like a good idea to pay off the mortgage early because home loan debts will be paid then, however this is not always suitable to everyone. It matters a lot to consider other aspects such as cash flow which is also a big deal.

Overpay Your Mortgage has some tips on why it is not necessary to overpay home mortgage, including investments, diversification and tax savings


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