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dkboo22 | Is IT TRUE THAT IF YOU MAKE 1 EXTRA MORTGAGE PAYMENT A YEAR THAT THE LIFE OF LOAN IS REDUCED SOME YEARS? WHAT? |
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Jordan K
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Yes. The extra payment goes entirely to the premium. If you have a new 30 loan, look at how much of the payment goes to interest. Probably 80%. |
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David L
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Thats very true. Also, you might look into making payments every two weeks to coincide with your paydays. (assuming that you get paid every two weeks) That along will take a lot off the interest you will pay and shorten the lift of your loan. |
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tewarienormy
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Yes Yes Yes!!!!!!!!!!!!!!!!! |
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rhsaunders
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That is correct. The amount by which the loan is shortened depends on the original length, the interest rate, how many payments have already been made, and the timing, so you will need a financial calculator to find out the exact amount of the reduction. |
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Rabbit
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Sure, do the arithmetic, wonderful things those calculators and spreadsheet programs on personal computers. Even without the calculator, one extra payment each year (or even one-twelfth of a payment each month), in 12 years you just took off a year in those old mortgages that calculate by a fixed number of payments (30-year mortgage is 360 payments, period--MOST banks don't do that anymore). So in 24 years you would only have 4, not 6 more years to pay. Seriously, most of us can spend a little bit of time and do some simple arithmetic to see the difference. The key is the interest is charged on the principle and when you pay extra it goes straight to principle, your base payment already took care of the assessed interest charge for the period when you made the payment. As the principle falls faster than the schedule of payments determines, then increasingly more of each payment also goes to pay principle. Think of it as compound interest in reverse. |
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aecharrion.rm
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depending on the company you go with ( ingdirect) you can make an extra mortgage payment or even a monetary amount extra every year to shorten the term however you have to come to an agreement before creating the mortgage. unless its already built in. |
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Dr. O'Pinion
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Part of your mortgage payment every month goes to interest and never really pays towards the house while the smaller portion goes towards the principle loan which is the actual cost of the house. Each month the interest rate is applied to the principle balance and therefore determines how much of your payment goes to interest. So by paying extra every month you can actually reduce the amount of your payment that is applied to interest and increase the amount that is applied to the principle ultimately reducing the term of the mortgage. The best way to visualize this is to get a amortization chart for your specific mortgage. I used to pay an extra $100 a month towards principle which adds up to $1200 a year which translates to $36,000 extra over the term which can shorten the mortgage by 10 to 15 years depending on the loan amount.
Advice: Pay as much as you can towards your principle mortgage to save thousands in interest fees.
Example: A payment on a $110,000 mortgage is about $1000 a month or $12,000 a year and a staggering $360,000 over 30 years. That is $250,000 out of your pocket expense just for borrowing the $110,000.
It's no wonder why people hate banks. They are so greedy. $250,000 could put you and your family in a whole new living situation instead of encouraging poverty. If I were wealthy like Bill Gates and Warren Buffet I would give people interest free loans to buy their homes. |
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FRANKFUSS
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Yes, it is true. Making one extra payment reduces the loan by chipping away at the principal. But you have to tell your lender that you want it to go to the principal part of the loan. |
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