How to Clear Your Mortgage Debts

A Guide to the Structure of Mortgage Payments

A mortgage is a way for you to purchase a house of your own without having to burden yourself with expending an amount that is too much for you to afford at one go.

how to pay your mortgage debts

However, it is very important to gain more knowledge about the components involved in mortgage payments. A Clear understanding of its structure is crucial when you decide to finance your house.

This structure is composed of the principal, the interest, the taxes and the insurances. All these components put together will identify the duration of payment until its completion and how much you will have to ultimately spend on your house in total.

Are you shopping for a mortgage? A great resource we recommend is to use the mortgage payment calculator at LifesGreat.com. The site is a good place to start gaining an idea of how much you may have to pay monthly according to the amount of money which you plan to borrow and the period of time within which you plan to repay in full.

For now, let us learn the basics.

What Comprises the Structure of Mortgage Payments?

Aside from the size or the entire amount of the housing loan and the term or the duration of the repayment of the housing loan, there are these four components that sum up to the entirety of your mortgage payment.

The Principal

The principal amount refers to the amount of housing loan or the original amount of investment on housing loan that is without the accumulated earnings or interests yet. It is usually in the final years of completion of the housing loan during which the repayment of the principal amount of debt is allocated.

The Interest

mortgage and housing loansThis interest refers to the earnings of the lender from the housing loan.

The interest rate directly influences how much the mortgage payments will be in the end. In most cases, if the interest rate is higher, the principal amount borrowed is reduced. While when the interest rate is lower, the original amount of investment on housing loan tends to be higher. This is the usual inverse relationship between these two components in the structure of mortgage payments.

The Taxes

The real estate taxes are determined, calculated and implemented by the government on an annual basis although new homeowners may opt to pay real estate taxes as part of their monthly amortization.

It is the housing loan creditor who collects the real estate taxes along with the monthly amortization and keeps them until the scheduled payment of taxes.

The Insurances

Mortgage payments may include private mortgage insurance coverage and property insurance coverage.

Basically, private mortgage insurance protects the lender while property insurance protects the house. The former covers for the housing loan creditor should the debtor fail with mortgage payments although the borrower can be let off the private mortgage insurance payment obligations upon completion of at least 20 per cent of the home equity.

The latter covers for the house itself in the event of destruction due to effects of natural calamities, occurrence of fire or other intentional actions inflicting damages on the residential property.

IVA Benefits and Downsides: An Affordable Debt Repayment System for your Business Loan

Getting a loan involves a risk of not being able to pay up due to unfavorable circumstances. When this happens, what are your choices? For many entrepreneurs, filing for bankruptcy is the last resort. If you want to put up a good fight, getting an Individual Voluntary Arrangement (IVA) may be just the solution you’re looking for.

IVA is an insolvency agreement that both you and your creditor would agree IVA for debt arrangementto.  In this agreement, your creditors would agree to a monthly payment for a fixed period, usually five years. You only have to pay what you can afford. Your creditors will then freeze interest, write off the balance of unpaid debts, and stop impending legal actions, which are some of the best IVA benefits.

Before you decide to get an individual voluntary agreement, you first need to know the pros and cons of IVA and how to include your business loan in your IVA.

Pros and Cons of IVA

Knowing the pros and cons of Individual Voluntary Arrangement will help you make an informed decision. Your debt repayment managers will discuss these in greater detail.

IVA Benefits:

– The interest of your debt will be frozen from the start of your IVA, so your debt level will not increase.

– You can say goodbye to creditors constantly calling you. Once they agree on an Individual Voluntary Arrangement, they are legally required to cease contacts demanding for payment.

– Repayments are based on what you can afford.

IVA Disadvantages:

– Your creditors would have to agree to an IVA, so there’s no guarantee that Debt solution for personal loansyour application will be approved.

– Even though the monthly payments are based on what you can afford considering your income, this may mean a tight budget during the duration of the term.

– IVAs will affect your credit score and will show up on your record for six years.

– IVAs are also listed on the Individual Insolvency Service register.

– There will be compensation fees to the IVA company.

Knowing the unique pros and cons of IVA, you will be in a better position to assess if you will benefit from this payment method. Would the advantages outweigh the disadvantages?

How to Include Your Business Loan in Your IVA

Before you go and hire the services of an insolvency company, you first need to know what type of IVA you should put your business into. The legal arrangements of your business dictate this.

If you are a Sole Trader, every personal unsecured debt that you have such as business loans, credit card debts, and overdrafts should be included in your IVAs.

Partnerships, Limited Company, and Limited Liability Partnership Debts are included in IVA differently.  IVA Benefits  are different for each business type.

Consult Insolvency Practitioners for More About IVA Benefits

IVAs can seem like the perfect way out of an impossible situation, but before you apply for one, make sure to first consult insolvency practitioners for more advice on the IVA benefits and downsides, policies, regulations, and other considerations.

Once you feel well-informed about the different aspects of IVAs, then it’s time to take charge and control your financial situation with an IVA.