The Amortization Schedule was good for our Grand Parents and Parents, so why have so many consumers moved away from the fundamentals? To answer this question, we must dig in a little deeper of what strategies are available in the first place.
When it comes to building wealth using your primary home, it can be accomplished 2 ways.
•1. You can never pay a dime extra to the principal, maybe even get some interest only option and invest this money elsewhere. This is called the investment strategy.
•2. You can pay down the principal and get the mortgage paid off years sooner and save thousands of dollars in interest. This is called a savings strategy.
Both strategies work but, before you plan which route is best for your situation, you will need to determine how you want to treat your home. I believe all homeowners should have a plan in place to help them get to their retirement objectives. A good balanced plan needs to balance how much they want to invest, how much risk they want to take and I also believe in having a savings plan built into your retirement plan.
For example, I have used my own home using the savings strategy. I plan on being in my current home for 10+ years and take risk with investments in other areas. I want to feel comfortable that someday I will own this home. I do not treat my home as an investment, but more as a nice tax deduction and a savings plan for my future. I have decided to risk my other dollars on rental properties, 401K plans, IRA's and someday I want to risk money on some business ventures.
What I want to share more about is the 2nd strategy.
The best and cheapest way to accomplish this without buying some elaborate product that costs thousands of dollars is to get an amortization schedule as shown below.
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Principal Loan
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Principal Balance
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Extra Payment Options
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NonePeriodicIrregular
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Interest Rate
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Term in Months
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Payment
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Total Payments
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Snapshot
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Payment #
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w/ Adjusted Payments
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Standard Amortization
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Principal Balance
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Principal Balance
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Savings @ Snapshot
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Savings
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Interest Saved
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# years saved on mortgage
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# total years to pay off
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This amortization schedule for instance shows how much you would save in interest and time if paid 1 extra mortgage payment a year.
Most professional mortgage advisors will have tools like this to help meet your savings strategy.
If our Grand Parents and our Parents made it happen so can you.
If you are ever needing someone to review your mortgage and need a "FREE" no cost Amortization Schedule, please give me a call.
Gary Miljour
AZ-BK-0904024
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Gary.... some good advice here. Yes, both strategies work..... but so many people are selling the number 2 strategy by way of these mortgage accelerator programs. Not only do I find them to be a risk, but that you have to be disciplined. And that they miss out on the tax deductions that add up, than the principal savings. But this is in conjuction with taking that extra money and putting it into other vehicles that allow for better results in regards to profit.... such as 401-k... stocks... IRA accounts... anything that can add a 2% or more return than the rate of your mortgage, will give you a better investment, than trying to pay your house off as quickly as possible. Unless you are filfthy rich or great with your money, it's almost impossible to accomplish both methods that you described, especially in today's market.
Just my .02.... but of 16 years of lending experience.