Most people think they’ll have a house payment and a car payment for the rest of their lives, but it doesn’t have to be that way with a plan and a little discipline. The plan is to make additional principal contributions to a fixed rate mortgage to shorten the term and save tens of thousands in interest.
If you make an additional $100 payment each month applied to principal on a $175,000 mortgage, it would shorten the loan by 5 years, 6 months. $200/month in additional payments would shorten the loan by 9 years. An additional payment of $459/month would shorten it to 15 years.
If you do make a decision to regularly pre-pay your mortgage, you should verify that the lender is applying the money to the principal each time, as opposed to being placed in the reserve account for taxes and insurance.
In today’s market, a savings account pays ~0.5% or less. Even with today’s relatively low mortgage rates, additional monthly payments still allow for considerable savings. Those who may need funds in the future should carefully consider this option due to potential difficulty in accessing equity from their home later.
Make your own projections using the Equity Accelerator. Whether you’re in search of a perfect, personal home, a rental home for long term investment or a beach vacation rental that can generate annual cash flow, call Sea Scape Properties today for expert advice on what, where and when to buy.