One of the best gifts a real estate consultant can give to a buyer client is education about how loans and amortization work-and how additional principal payments can help them reduce the term of the loan.
In other words, it helps to know if you make one full monthly payment extra per year translates in paying the loan off a few years earlier.
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 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 a person were to make an additional $100 payment each month applied to principal on a $175,000 mortgage, it would shorten the loan by five years six months. If the person were to make $200 a month additional payments, it would shorten the loan by 9 years. $459 additional payment would shorten it to 15 years.
If a person does make a decision to regularly pre-pay their mortgage, it will be their responsibility to 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 around 0.5% or less. Even with the low mortgage rates available, there is still a considerable savings. People who might need the funds in the near future should carefully consider this option due to the difficulty to access equity easily from one’s home.
Make your own projections using the Equity Accelerator.
Buy or Sell with Chris and Patty Clark Denver, Co
If you would like for us to send you properties on a daily or weekly basis just call or email us and let us know your wants and needs. We will match them with a home you love and with monthly payments you can afford. We specialize in first time home buyers.