Home Loan & Mortgage Repayment Options

Gain more insight into repaying your mortgage

Whether you just started paying your home equity loan or mortgage repayment, or you're well into it, it's never too late to gain a better understanding of what's included in that monthly payment. At the very least, your mortgage will consist of principal, which is the balance of the loan you took out, and interest. Your homeowner's insurance and property taxes may also be included in your monthly payment, although some borrowers opt to pay those on their own, leaving the mortgage payment as a combination of just principal and interest.

The composition of your mortgage payment

Mortgage repayment operates on what's known as an amortization schedule. Your mortgage is fully amortized when it's paid in full. When you start repaying your mortgage, the bulk of those initial payments is applied to interest rather than principal. As you continue to make payments and time goes on, more of the payment goes to the principal. This means that in the early years, you'll earn little equity in the home as equity results from paying down the principal.

However, this is the common method of mortgage repayment because it means your monthly payment will stay the same. Without this system, your payments in the beginning would be much larger as you would still pay most of your interest plus more money toward the principal.

If your mortgage allows prepayment, it may be a good idea to pay more in any month when you have the opportunity. Not only will this pay down your principal, allowing you to earn equity faster, but it will also reduce the overall loan balance on which interest is charged, which can save you money.

Payment options when you're repaying a mortgage

Now that you understand how your mortgage payment works, you can explore the different ways to make your monthly payment:

  • Automatic deductions: Paying your mortgage late or missing a payment altogether can do damage to your credit report. To avoid this mishap, set up automatic deductions. Your lender may designate a set day of the month that payment must be made, or you may be able to choose from several dates your lender designates. Check with your lender to find out your options.
  • Standard monthly payment: Mortgage repayment usually happens on a monthly basis, but you can also opt to pay every two weeks. This means you'll pay slightly more in a month, but again, this can help you pay down your principal a little faster, earning more equity and less interest. Many lenders charge a fee for this type of service so check with them to find out the cost and any additional details.

Home loan repayment tips

If you're repaying a home equity loan, the rules and options are pretty much the same as they are for primary home loans or mortgages.

  • The major difference will be the length of the loan term and the interest rate. Home equity loans can be as short as three years and as long as 30, which will have an impact on the size of your monthly home loan repayment.
  • The other major factor in that payment is the interest rate. Home equity loans tend to carry slightly higher rates than mortgages because they represent more risk. You can learn more about the rates and home equity loan terms here.

Work with Citizens Bank to find the mortgage repayment option for you

When you have a mortgage or home equity loan with Citizens Bank, you can take advantage of automatic deductions and convenient online access to your account along with other benefits. To learn more, speak with a Citizens Bank mortgage servicing specialist at 1-800-234-6002.


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