Save Money On Your Mortgage Loan

Save Money on​ Your Mortgage Loan
Did you​ know if​ you​ borrow $100,​000 for a​ mortgage loan,​ you​ may pay back as​ much as​ $300,​000? Yes,​ its true,​ and you​ may pay more than that depending on​ the​ interest rate and the​ number of​ years it​ takes you​ to​ repay the​ loan .​
The amount is​ even higher if​ the​ terms of​ your loan require mortgage insurance .​
There is​ a​ solution if​ you​ are able to​ pay something extra each month even if​ it​ is​ a​ small amount .​
Let’s say you​ borrowed $100,​000 and for your first payment,​ you​ paid the​ regular monthly payment of​ principal and interest in​ the​ amount of​ $825.00 .​
as​ a​ reasonable example early in​ the​ term of​ the​ loan,​ $800 may be applied to​ interest and $25.00 is​ applied as​ principal .​
Your outstanding balance is​ now reduced to​ $99,​975.00 and the​ interest for the​ next payment is​ calculated on​ that amount .​
If you​ had paid an​ extra $50.00 with the​ payment,​ the​ $50.00 would have paid two more scheduled principal payments and you​ would have saved two interest payments .​
Using the​ above figures as​ an​ example you​ would have saved approximately $1,​600.00 .​
That’s right - $1,​600 in​ interest that you​ would never have to​ pay .​
In addition the​ interest amount due next month would be calculated on​ a​ lower balance.
The terms of​ the​ mortgage require a​ monthly payment of​ the​ full amount due for the​ monthly principal and interest payment .​
Most mortgage documents allow additional principal payments (also known as​ curtailments) without penalty; however,​ you​ should verify this with the​ lender or​ review the​ loan documents .​
If there are no penalties,​ you​ can save several thousand dollars over the​ term of​ the​ loan plus you​ don’t have to​ spend thirty years paying off your loan .​
As we saw with the​ example above,​ a​ payment of​ an​ extra $50.00 resulted in​ savings in​ the​ interest .​
(The actual amount will vary depending on​ the​ loan amount and interest rate.)
The earlier you​ start paying additional sums during the​ life of​ the​ loan,​ the​ better .​
in​ the​ early years,​ the​ largest portion of​ your payment is​ applied as​ interest with a​ small amount going to​ the​ principal balance .​
Those small amounts will be easier to​ pay as​ additional principal payments and you​ will see substantial savings in​ the​ interest payments that you​ will never have to​ pay .​
As the​ balance is​ reduced the​ scheduled interest payments will be lower as​ the​ interest payment is​ calculated on​ the​ outstanding principal balance.
The principal balance will slowly start decreasing and before you​ know it,​ you​ will see a​ substantial reduction .​
It would be a​ good idea to​ ask your Lender to​ send you​ an​ amortization schedule so you​ can track your savings .​
This schedule shows the​ breakdown of​ the​ amount due for principal and the​ amount due for interest each month.
By reducing your principal balance faster than scheduled you​ will be able to​ request cancellation of​ your mortgage insurance,​ (MI or​ PMI) if​ your loan has insurance .​
Lenders require this insurance on​ loans with a​ loan to​ value ratio (LTV) of​ 80% or​ more .​
As your principal balance declines,​ the​ LTV will decline quickly as​ well .​
The Lender should be contacted for more information on​ canceling mortgage insurance as​ early cancellation could save you​ a​ substantial sum .​
This is​ in​ addition to​ the​ interest savings.
So remember,​ if​ you​ want to​ save money on​ your mortgage loan,​ check your loan documents for any restrictions,​ request an​ amortization schedule,​ and ask about the​ requirements for cancellation of​ mortgage insurance .​
Enjoy Your Savings
Save Money On Your Mortgage Loan Save Money On Your Mortgage Loan Reviewed by Henda Yesti on June 26, 2018 Rating: 5

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