Whether or not to pay in advance: calculate the opportunity cost before deciding
Interest was saved on early repayments and other investment possibilities for the money were abandoned, depending on the difference between the two.
Do you want to pay the mortgage in advance? There is no standard answer to this question, and the core is to compare `the interest rate saved by early repayments' to `the return on the investment'. If the mortgage rate is 4:05, and you can only buy an annual savings or a bank account at 2:05, then early repayment is equivalent to a steady profit of two points, which is usually worth doing. On the other hand, if you are certain of the return on the investment above the mortgage rate, then the cash is retained for the better.
Shorter duration or less month
- Shortening the duration of the loan: Total interest has dropped most, suitable for debt-free as soon as possible People
- Reduction in monthly supply: reduced monthly pressure, with limited savings on total interest
- After partial early repayment, make sure you apply to the bank for a reduction instead of a default reduction.
- Give priority to the highest-interest-rate debt, the order is more important than the amount.
Bank default operations are often `reduced monthly supply', as this reduces the total interest and is more favourable to banks. You have to take the initiative to ask for a "shorter term" in order to really save interest. For the bottom logic of interest rate comparison, it is extended to read [how the mortgage rate compares] (/compare-loan-interest-rates). Advance repayments may also involve default payments, and the terms of the contract usually include a charge for early repayment within one to three years of the release, which is free of charge.
Under what circumstances?
If you are enjoying very low historical interest rates (e.g. below three o'clock) and you have a channel of stable return above that, early repayment is not cost-effective. In addition, interest rates on Provident Fund loans are usually much lower than those on commercial loans, and priority should be given to repaying loans and retaining them. More basic planning lines can be found in [individual-tax-basics] and [establishing a contingency fund] (/build-emergency-fund).