If you have a mortgage, you should read this post written by John Cannata.
You heard the radio adds, the television commercials, and your neightbor talk about the mortgage rates being at an all time low. Then you called your local mortgage company only to find out the rate was not much better than your current rate. Now what? Don't worry, you still have options and it wont take a refinance to do it.
Did you know that most mortgage companies will allow you to make additional principal payments on your loan balance? Perhaps you receive a larger than expected tax return, an inheritance, a non-taxable cash gift, or that work bonus you were not expecting. You could apply this money toward your loan principal which result in a signicant savings and shorter loan life.
For this example, I am using a loan balance of $150,000, a rate of 5.0%, and a 30 year fixed rate mortgage. Please note that these examples are useful on Conventional, FHA, and VA loan programs. The only time this will not apply is if you currently have an Adjustable Rate Mortgage.
Based on the above numbers, your mortgage payment (principal and interest only) would be $805.23 per month. If you made each payment on time, with no additional principal, then at the end of 30 years, you will have paid $289,885.27 in payments ($139,882.27 in interest).
Does your budget allow for you to make one additional mortgage payment per year ($805.23 per year) which would be applied directly toward your principal? If so, you would pay off your mortgage in 305 payments (25 1/2 years). This is a savings of $$24,524.59 in interest. Think you can save $805.23 a year? No? How about if you broke up the $805.23 in 12 easy installments?
Look over your budget and see if you could afford $67.11 per month to add to your mortgage payment. By making this additional principal payment each month, you have increased your overall savings to $25,453.13. Your mortgage would be paid off in as little as 303 payments (25 years, 3 months).
All of this without spending ONE DIME on refinance fees. If you already have a great rate, but would like to pay off your mortgage sooner, this is the best way without refinancing to a shorter term. For best results, apply principal reductions more often rather than making one time payments each year. If making a principal reduction once a year, or once every 5 years is your only options, still do it. The reduction should still save you thousands of dollars in the long run.
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If you live in the state of Texas and are looking for a reliable Mortgage Professional to assist you with the loan product that best fits your financial situation, give me a call. We do not charge upfront fees to run scenarios or charge unnecessary application fees.
Do you want to know all of your options? Call me today and let's discuss them further.
Always available for your Frisco Texas Mortgage needs!
John Cannata Reliant Mortgage p# 214.545.5604
Frisco Texas Mortgage Consultant
Hablamos español.
As an SRES® designee, I have received additional education on such topics as tax laws, probate, estate planning, equity conversion strategies, and can offer you information on current market trends as well as valuable resources regarding real estate transactions.
What if you make alot of money and need the write-off?
Shirley - excellent advice, I have always paid additional principle when I have had a mortgage (which is part of what allows me to be mortgage free right now). And, even though you couldn't show it with your figures, it does help with an ARM, also.
Hi Michael, Our mortgage is paid off and I am very happy about that.
Hi Mike, Good to hear that your mortgage is also paid off.