Archive for December, 2011

Mortgage prepayment is known to offer a number of advantages. Mortgage is generally the biggest single loan that a borrower has taken out in his lifetime. If one manages to prepay the debt generated from mortgage, the three primary benefits he will enjoy are cutting down the term, reducing overall expenditures related to interest and increasing equity accumulation. In case of  a thirty-year mortgage on fixed rates, if the borrower keeps on making an additional monthly payment every year, he will successfully reduce the duration of mortgage by 7 years. Similarly, on making two additional monthly payments for mortgage every year, he will end up reducing the mortgage term by close to 15 years i.e. almost half of the actual mortgage period. Any borrower needs to spend probably the biggest  [...]

There are 2 primary financing options for the business owners for expanding and operating businesses. Owner's equity is the financing process in which the business owner deposits his personal cash for the growth of the business. Debt financing, on the other hand, is a procedure involving borrowing of money from third parties in exchange of interest. In this article, we have discussed  the advantages of debt financing. The most prominent advantages of debt financing is that it comes back with higher returns on the investments made by the business owner. For instance: a business requires a capital of $200 and returns a profit of $40 after a year. This means if the owner opted for investing $200 from his equity, he would enjoy a return of 20%. However, when the owner invests $100 and borrows  [...]

Paying off loans during the first 2 to 5 years of loan period is likely to impose a prepayment penalty on the person taking the loan. However, prepayment penalties can be easily avoided; below, we have discussed how can a person, who has already taken a loan with prepayment penalty, avoid paying the penalty. First go through the loan note carefully. This will allow you to know the terms and conditions of the loan and the length of the prepayment period. Now, find out why it is important for you to eliminate the clause of prepayment penalty. Two of the most common reasons leading to such change are shifting to another place and refinancing for getting a lower interest rate. If you are shifting to another place, you must consider whether it is voluntary move or you are being transferred. Once  [...]