![]() Given that there are 12 months and 52 weeks in a year, paying 26 bi-weekly payments is like paying 13 monthly payments, with the 13th payment going entirely toward the principal of the loan. Bi-weekly Paymentsīi-weekly payments are another popular way to pay extra on a mortgage. Consumers without a regular source of additional funds have other options for taking advantage of mortgage cycling, such as using tax refunds or cutting back on luxuries. Even bi-annual payments of significant size can reduce the term of the loan and the total interest paid. While not every borrower can schedule extra payments with standard frequency, extra payments can come from other sources. With mortgage cycling, the borrower sends in an additional payment of $99.55 to be applied to the principal. This breaks down to a payment of $500 towards interest and $99.55 towards the principal. For a $100,000 loan at 6 percent interest for 30 years, the monthly payment is $599.55. Frequently, the recommended method suggests making an extra payment equal to the principal amount owed on each monthly bill. Then at regular intervals from once a year to every month, the homeowner pays an additional amount towards the principal balance. Borrowers make the standard mortgage payment. The basic method of mortgage cycling pays down the principal balance faster than scheduled. Without an accurate analysis of the borrower's financial situation, it is possible that the riskier techniques can lead to higher interest costs and the prospect of foreclosure. These techniques include taking out short term home equity loans to make payments towards the principal of the original mortgage. ![]() However, some methods of mortgage cycling may involve higher risk to reward ratios. The basic strategy is easy to understand. Although the concept may be new to some homeowners, the strategy has a proven record of accomplishment when followed correctly. One popular method is called mortgage cycling. Mortgage Cyclingīorrowers have a variety of options for paying off home loans prior to the maturity date. The loan is paid in full in 13.4 years instead of 15 years. ![]() If the monthly payment is $2,372, making a payment of $2,572 saves $15,376 in interest over the life of the loan. For example, on a 15-year loan of $300,000 at 5 percent interest, adding $200 to each monthly payment reduces the interest costs substantially. This payment strategy shortens the loan from 30 years to just over 24 years.Īn alternative to making one extra monthly payment per year is to make a higher monthly payment. However, if the homeowner pays one additional monthly payment per year, the total interest paid declines to $249,000, a difference of $70,000. By making the scheduled payments over the life of the loan, the total amount paid in interest will be $319,000. On a 30-year mortgage with the original principal total of $250,000 and an interest rate of 6.5 percent, the monthly payment is $1,580, including both principal and interest. If a borrower makes an extra annual payment, the savings on interest can be quite substantial. More payments on the principal of the loan equate to assets earning interest at the same rate as the interest rate on the loan. This method gives the property owner a home free and clear of debt. This provides for a margin of protection by lowering the interest costs. In addition, the home equity will grow at a faster pace when extra payments are applied to the loan. Making additional mortgage payments will shrink the total amount of interest paid over the life of the loan, and the borrower will pay off the debt more quickly. ![]() However, a security system will not protect the homeowner against financial disaster or bankruptcy. Many homeowners invest in home security systems to protect their property and personal assets. Set your search criteria by entering your loan data and selecting the relevant products from the dropdown, click search and we'll help you compare the market by showing you the most relevant offers for homeowners. Our rate table lists the best current local mortgage rates available from our lender network. **Payment schedules may take a while to appear - depending on the speed of your computer and the number of payments remaining. *Based upon a 10% yield of the money saved over the life of the loan. Other monthly homeownership expenses (taxes, insurance, maintenance, HOA, etc.):Ĭurrent approximate balance of your mortgage: Current mortgage's beginning loan amount:Ĭurrent interest rate (APR%) Save More Locking in Low Rates:Įxtra amount you could comfortably add to the payment each month:
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