Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Home Loans and other Mortgages topics.
It is hard to comprehend the fact that most new mortgages are written on a 30 year term. It is even harder to comprehend that the vast majority of these mortgages will never be paid in full because very few people remain in a home for that long. Do you want to be paying a mortgage forever? If you are like most, you would answer with a resounding 'No!'
Here is the best way to pay your mortgage down a little faster than your set term and a way to figure just how fast you can pay it off. There are home mortgage calculators available on the Internet that can tell you how a single or multiple extra payments will influence your overall payoff. It amazes most to learn that by making a single extra payment a year, a person can shave up to 10 years off of a 30 year mortgage term.
Most people would think that making double payments each month would pay your home mortgage off in half of the time, but this is way off. The truth is that every penny of your extra payment goes towards your principal. Your regular payment is split between your principal and your interest, so by making a double payment, you are really making a triple principal payment. Take advantage of these free mortgage repayment calculators to see just how much faster you can pay off your home mortgage.
I have a 30 conventional mortgage with a major bank. My PIT (I don't have mortgage insurance) is $1,120 per month. Since the start of the loan, seven years ago, I've paid $600 two weeks prior to the due date, and another $600 on the due date each month. As a result, I've overpaid each month, and paid over 50% of the payment early each month.
I assumed that this would get my mortgage paid off early, and I recently requested an accounting statement with payments received and amortized balance. I was shocked to learn that the lender had set up a side or holding account, and was depositing the payments into it, pulling out only the amount of the scheduled payment each month - on the date due. They never informed me of this or received any sort of authorization. I'm crushed. I thought I was going to be way ahead. I didn't know that a bank could unilaterally do this.