Paying Off Mortgage Early| Home |
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Paying Off Mortgage Early Paying off a mortgage early is very beneficial financially as well a benefit in that it relieves you of a stringent personal responsibility. Imagine having no mortgage! It is beneficial to your finances because you will be paying off the mortgage ahead of schedule and therefore it will leave you many years of not needing to make monthly payments when you would have otherwise been paying them.
For instance, if your mortgage payment was $2000 a month and you pay the mortgage off five years or 60 payments ahead of schedule, that would be 60 payments of $2000 you would not have to pay. This would total $120,000 in savings. Of course, a penny saved is a penny earned and therefore paying off your mortgage ahead of schedule will earn you, in this case, $120,000.
To pay off a mortgage 60 months early doesn't mean you have to make 60 extra full payments. Let me explain: every mortgage payment consists of two parts; interest and principal. In the early stages of your mortgage the principal portion of the payment will be very low and the interest on the payment will be very high. This is because there is a lot of time left on the mortgage and interest is actually a time payment.
It is typical for early payments of $2000 to be $200 in principal and $1800 in interest. What this means is if you pay an extra $200 you will be actually making a $2000 payment. Why? Because you will be using no time to make this extra payment you will only be paying principal and you will need no more time to do so. If you make 60 such payments, you will be saving yourself 60 payments of $2000 each. Of course, it can be difficult, without an amortization schedule, to know just how much the principal part of your payments are at any giving point during the mortgage. The video below shine some light on this subject.
http://earlypayoffcalculator.com Being able to experiment with different amounts of extra monthly payments will allow you to determine how much money you can make on your mortgage. Of course, it can be difficult to pay any extra money at all because of course; times are rather tough right now. However, if it takes a little sacrifice to come up with $100 or so each month you may find it will be worth the sacrifice. The reason for this is because it may take only $100 a month to give you a net gain of $100,000! |