prepayment.
first of all, we should know that what we call "the best time for prepayment" is a false proposition! This is because whether it is equal principal and interest or average capital, although the total interest differs a lot, there is no difference in essence, not to mention which way the bank overcharged interest and took advantage of it. Whether it is a provident fund loan or a commercial loan, the loan is repaid in advance in the first year, the fifth year, the tenth year and the twentieth year. As long as the interest rate remains unchanged, the banks are all fairly measured. However, for those who don't want to owe money and feel that such long-term loans bring pressure to their lives, why not choose to borrow in advance? After all, it's up to you how to distribute the money in your hands. However, I would also like to remind those who have borrowed for a long time that there is no doubt that the loan cost will increase sharply if the loan time is too long.
So, for those who want to repay the mortgage in advance, which is better, "reducing the monthly payment" or "shortening the service life"? If only from the perspective of saving interest, it is definitely the most cost-effective to shorten the loan period. Choosing which way to save money is actually very simple, as long as you master a rule that "the more principal you have to pay, the more interest you save". If the customer chooses to shorten the loan term and the monthly payment remains unchanged, the repayment cycle of the customer will be accelerated because the monthly repayment amount of the customer has not changed. However, from the perspective of buyers, shortening the loan period is not suitable for everyone. For buyers who choose to repay the principal and interest with equal amount, when the repayment period exceeds half of the loan period, it means that nearly 8% of the interest has been paid off within this period, and the remaining monthly payments are basically principal, so it is of little significance to shorten the repayment period in advance.
actually, reducing the monthly payment and reducing the number of years are actually the same thing. One is to reduce the monthly repayment pressure, and the other is to shorten the repayment period. The former has an immediate effect and may only need to pay back half next month. It may take you years to feel the latter, but you will be very happy when the time comes, because your debt has been paid off. If you have a forecast of income fluctuation, such as a premonition that your income will drop, then a better choice is to reduce your monthly payment. If you just have spare money, then you can choose both. Moreover, for those who prepay, generally speaking, the monthly payment should be controlled at 3%-4% of the monthly income, and at most it should not exceed 5%. Specifically, you can make a rough calculation of the monthly daily expenses to determine the monthly repayment amount. Knowing the monthly payment, combined with the total loan funds, we can figure out how to arrange the loan period most reasonably.
Finally, I would like to remind you that some banks have requirements for repayment time and liquidated damages in advance, while others don't. When signing a loan contract, if you plan to shorten the repayment period in the future, you'd better consult the bank, understand the relevant regulations and make a choice according to your actual situation, so as to avoid future troubles.