Payoff Home Loan Faster
Monday, 15 February 2010 10:16
Author: Mark Murphy
Primarily most home loans are designed for 30 years schedule i.e. When you obtain home loans you are supposed to payoff over a period of 30 years. This allows for smaller monthly installment and at the same time living the american dream.
Primarily most home loans are designed for 30 years schedule i.e. When you obtain home loans you are supposed to payoff over a period of 30 years. This allows for smaller monthly installment and at the same time living the american dream.
Many of us do not like a loan hanging on our head and would like to payoff sooner if there is a possibility to do so. This is certainly doable and you have to implement a smarter strategy. Even if you can afford higher payment always go for a long term loans i.e. 30 years. Let's say you borrowed $100000 at 6.25% rate your monthly payment would be $615.72 each month for next 30 years. Now the same amount borrowed at 6% for 15 years would result in monthly payment of $843.86. The difference here would be $227.64.
Now if you pay this difference of $456.28 every month towards your principal in addition to your regular monthly payment of $1231.43, you will payoff home loan in little over 15 years. One may argue that this is pretty much same as taking out the short term loan which in part is correct, however in short term loan you are mandated to make larger payment while here if there are month or two which are tight in terms of finance, you can skip that extra payment. You are still obliged to pay your regular payment of $1231.43 but that extra payment is at your discretion. I think this flexibility is very important rather than being locked in higher payment per month.
It is worthwhile to check lender's policy before signing on the dotted line to make sure that there is no hefty penalty or fines if you try to payoff home loan faster. This has happened to some of the borrowers where they had to incurr heavy fines while trying to payoff home loan faster.
It is financially smarter to take out a longer term loans with a goal to payoff sooner. This allows you smaller monthly payment and at the same time ability to do extra payment towards principal.
Primarily most home loans are designed for 30 years schedule i.e. When you obtain home loans you are supposed to payoff over a period of 30 years. This allows for smaller monthly installment and at the same time living the american dream.
Many of us do not like a loan hanging on our head and would like to payoff sooner if there is a possibility to do so. This is certainly doable and you have to implement a smarter strategy. Even if you can afford higher payment always go for a long term loans i.e. 30 years. Let's say you borrowed $100000 at 6.25% rate your monthly payment would be $615.72 each month for next 30 years. Now the same amount borrowed at 6% for 15 years would result in monthly payment of $843.86. The difference here would be $227.64.
Now if you pay this difference of $456.28 every month towards your principal in addition to your regular monthly payment of $1231.43, you will payoff home loan in little over 15 years. One may argue that this is pretty much same as taking out the short term loan which in part is correct, however in short term loan you are mandated to make larger payment while here if there are month or two which are tight in terms of finance, you can skip that extra payment. You are still obliged to pay your regular payment of $1231.43 but that extra payment is at your discretion. I think this flexibility is very important rather than being locked in higher payment per month.
It is worthwhile to check lender's policy before signing on the dotted line to make sure that there is no hefty penalty or fines if you try to payoff home loan faster. This has happened to some of the borrowers where they had to incurr heavy fines while trying to payoff home loan faster.
It is financially smarter to take out a longer term loans with a goal to payoff sooner. This allows you smaller monthly payment and at the same time ability to do extra payment towards principal.