Mortgage Extra Payment Per Year
The impact of paying more on our Mortgage…?
I have a mortgage that we’ll start paying in September.
The amount financed is $75,848.57. Our interest rate (APR) is 6.8770%. We are in a 30-year mortgage.
The first 359 monthly payments (29 yrs. and 11 mos.) are $500.30. The last payment is $500.26 on 8/10/2037. If this is what happens, our $75,848.57 mortgage will cost us $104,259.39, according to our truth in lending disclosure!!!
What would be the impact on our mortgage if we put another $100 onto our monthly payment, paying $600.30 per month? How many years of the mortgage will that knock off? For extra credit, what about an extra $150? $200?
i really don’t have the tools to run a break-down, and there are several online.
Here is one
http://www.yourmoneypage.com/home/bigloan4.cgi
It shows 11 years earlier and a savings of 42K
$200 a month shows 17 years earlier and savings of $59K
The first thing you need to do is check if you are even allowed to pay down principal according to your mortgage agreement.
Some don’t allow you to pay more, or even if you do they you still have to pay off the full interest you would have paid.
You need to go over that mortgage and see if any of these are options. If they are not, then you need out and need to refinance the mortgage asap.
Now, lets not get ahead of ourselves year. $200 a month and 17 years? Wow. Pretty good right?
Lets see what else you could use that money for. If you have not opened your 401(k) you are missing out on a lot of tax savings and investment gains
Example: $200 a month at 11% a year (average S&P500 over its history) for 15 years, the number of years you’d be putting in 200 extra dollars would net you $79,969.
So you saved $59K in interest payments, but lost almost $80K in investment gains. The lower the interest rates are, the bigger the gains you missed in investments. (diff. between 11% market rates and your interest payment rates)
In summation, there is a great deal to be saved, but do your homework. Find out penalties and make sure you weigh that with other things that you could be doing with that money in terms of investment.
The important thing is that you are doing something with that money.
Real Estate Tips for Buying & Selling : How to Save Money on Your Mortgage
