Pay Off Your Mortgage Early
Paying off your mortgage early is probably not one of your highest priorities in these unprecedented days of severe economic recession. Like most people in the US, chances are you’re struggling to keep your home and worried about an upcoming balloon payment on the horizon.
This is not some gimmick or false promise but is based on real mathematical calculations that are not too difficult to understand. Instead of getting out a calculator or going to a website that can instantly calculate an early mortgage payoff, we can take a hypothetical house and mortgage and work with that information. This statement can be backed up by math principles and is not a scam. Instead, it is something that you can understand quite easily. Without visiting a website that will quickly calculate an early mortgage payoff, it is possible, as an example, to work with some theoretical numbers that represent the home mortgage.
For example, we can start with a $200,000 house that has a 30 year fixed rate mortgage at 7%. When that house is paid off after 30 years, the actual cost of the mortgage is $479,000. This figure was derived from a simple loan amortization calculator. That is a significant amount of money! Now let’s see how we can reduce that amount.
We can use a standard 30 year fixed rate mortgage for a $200,000 house with a 7% interest rate. When the term of the loan has been paid, 30 years later, the total cost of the mortgage is $479,000. This number was obtained by using an amortization loan calculator. Let’s see how we can lower that number since it is so large.
Our formula then would look as follows: $200.000 ‘f7 360 = $555.56. $555.56 is the portion of the monthly mortgage that is the average principle pay out over the length of the mortgage loan. I bet you’re thinking that you could cut your mortgage from 30 years to 15 years if only you were to pay that additional $555.56 on a monthly basis.
Not many people have that kind of money. The point is that if you were to pay a small amount extra per month you could cut a dramatic number of years off your total mortgage. We’ve already determined that an extra $555.56 per month will cut your mortgage by 16 years and 2 months.
Few individuals can pay that amount of money. However, you could dramatically cut the number of years off your mortgage by paying a small additional monthly payment. We have established that you can decrease your mortgage by 16 years and 2 months paying an extra $555.56 monthly. Would you believe that you could pay off your mortgage in 22 years & 8 months by simply paying one quarter of $555.56, which comes out to $138.89 monthly? Essentially, this payment schedule is cutting more than 7 years off the 30 year mortgage term!
For an added mortgage payment of less than $140 per month, that’s not bad. Paying off your mortgage early is the point of this exercise and it’s just a means to get you thinking how adding a little extra money monthly helps. Hopefully, you now understand that an early mortgage payoff can be achieved rather easily.