Purchasing a home is undoubtedly on the bucket list of nearly every homeowner, but dealing with home loans is quite challenging. The good news is that there are tools out there that can help you and enable you to become knowledgeable. An example of such a tool is a home loan calculator with prepayment options. It is a handy tool to get information on your mortgage journey. But, before highlighting the advantages of using the calculator, let’s know the importance of home loan documents for loan approval.
Home Loan Documents: Why Do You Need Them?
Many documents are needed when applying for home loans to lending companies. If done in advance it becomes easy and reduces the chances of a delay to simplify the process. Here are some key documents to keep handy.
Proof of Identity: Passport/driver’s license/any legally issued identification document and the Social Security card.
Proof of Income: Original identification documents – passport, driver’s license; utility bills for the past 3 months.
Employment Verification: Employment letter that comprises the employer details, offered position, salary and employment status.
Asset Verification: Statements of the bank, statements of investment accounts, statements of retirement accounts.
Property Documents: Contract of sale, the assessment of the property’s value, and title insurance information.
How Prepayment Works and How It Benefits The Borrower?
A home loan calculator with prepayment functions allows you to know and calculate the impact of making additional payments towards the principal amount.
Reduced Interest Payments: The more the amount of a home loan is, the more the interest. It essentially means that with extra payments you are paying a smaller principal amount. Hence reducing the possibility of accumulating interest for the entire agreed duration of the loan.
Shorter Loan Tenure: This may reduce your loan term which is why prepayments are often associated with shortened loan terms. This also results in the fact that you own a home earlier and pay a considerably lesser amount of interest charges.
Improved Cash Flow: They help consumers repay a manageable amount of their loans every month, thus increasing their cash availability for other uses.
Here’s how to get the most out of a home loan calculator with prepayment functionality:
Set Prepayment Options: Decide if you want to make the one-time prepayment, pay in bulk, monthly, or annually, and the required amount.
Run Simulations: Carry out a comparison of the various prepayment plans with respect to the total interest that is going to be paid, and the total time that will be taken in order to clear the loans.
Compare Results: Reflect on the side-by-side comparison of your base loan scenario and the prepayment ones.
Considerations To Take in Before Making Prepayments
Before prepaying a fixed amount there are a few things that one must consider which are as follows:
Emergency Fund: Before planning to make any prepayments for future requirements, ensure to have save or what is known as an emergency fund for the emergency events that may arise in future.
Investment Opportunities: If you have a high-interest investment, then it is preferable to allocate some amount there before making a prepayment.
Know More: https://www.herohousingfinance.com/blog/knowledge-series-of-experts/what-is-collateral-loan
Conclusion
Using a home loan calculator with provision for prepayments offers you the power in your hands. It equips you to change the various possibilities and learn how prepayment can even boost the process of homeownership. But, do not forget to think about your special needs of money, any investment options, and any penalties for early payoff. Together with having your home loan documents well arranged this approach will make it easier and well informed to acquire your dream home.
