The mortgage cost averaging was taken from the principle of dollar cost averaging. It has proven to be more effective way to earn gains from investment than lump sum investing. The same principle can be applied to mortgage.
The borrowers start the panic attack as the mortgage interest rate start to rise. If the interest rate keeps rising, the mortgage payment may be unreachable for the borrower. The borrower takes a risk for foreclosure.
The home property is a huge investment. To focus on the house as an investment takes the pain out of mortgage. The greater the risk leads to greater rewards. Hence, the principle of mortgage cost averaging helps to condition our mind to succeed.
The interest rate of the mortgage is a cycle of seven to ten years. Every seven to ten years, the interest rate reaches the peak of high or low. So, the cost of mortgage varies thru the years.
Traditionally, the dollar cost averaging relates to investment of shares, stocks, and mutual funds. Since the home property is an investment, the principle of dollar cost averaging can be applied to mortgage. The price of the home comes in a huge price tag. Often, the borrower takes a mortgage to purchase a home.
The principle of dollar cost averaging work this way. The investor buys shares, stocks, or mutual fund in a set interval like monthly, or bi-weekly. The price of shares, stocks, or mutual funds may be high or low at some point. Thus, the cost of shares, stocks, or mutual funds averages. Thereby, the investment gains faster.
The first step is to calculate a mortgage. Using the mortgage calculators, you calculate the different mortgage payment for series of interest rate. See what mortgage payment is tolerable. The interest rate of the tolerable mortgage payment tells if you are paying high or low. For example, the interest rate of six percent on 400,000 principal is tolerable for me.
If the interest rate increases so high, the mortgage payment proves to be unbearable. There are available mortgage refinancing options. Talk to your mortgage lenders for more information.