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Paying Down Your Loan Faster!

July 28, 2012

Paying down your mortgage is one of the most important things that you need to do. The fact is that making a commitment to repay your mortgage in 10, 20 or 30 years, is a good choice. But, what if you could cut down that time considerably? Perhaps you could even knock years off of your loan by just making one extra payment per year. You may be one that is thinking that you cannot afford to do this. Chances are good, though, that you can do it without even realizing it.

How Does One Payment Matter?

Making an extra payment to your mortgage is something that you should consider because it can save you thousands of dollars. The fact is that just one payment can make a considerably difference in the total that you pay for your home and what’s more, it can shave years off of that mortgage. Take a look at the following example. You can use a mortgage claculator to help you to find out this information specific to your current loan.

If you currently have a $200,000 mortgage loan and you have secured an interest rate at 6.5 percent, your monthly payment is likely to be $1264 dollars per month if your loan term is 30 years. This is a considerable payment and you may not realize that the real facts of what you will be paying on the home you are purchasing. It will cost you far more than $200,000.

Original mortgage amount: $200,000

Interest rate: 6.5 percent

Term: 30 years

Monthly payment: $1264

Total interest paid on your loan: $255,088.98

How much you will really pay in full at the end of your term: $455,088.98

This information is provided to you on your amortization statement which is what you will see at the time of closing the sale on your home. Your lender must provide this for you before you sign your paperwork, so it should not be too much of a surprise to you as to how much you will pay for your home when interest is factored into the cost. If you are still unsure, use a mortgage calculator to help you to see what these numbers are for your particular situation. What will likely be a shock to you is just how much you can save if in fact you add that additional payment to your loan. If you add just another payment per year of $1264 as in the example above, you could save yourself quite a bit of money. Here’s how this breaks down for you.

Original mortgage amount: $200,000

Interest rate: 6.5 percent

Term: 30 years

Monthly payment: $1264

Additional payment per year of: $1264

Total interest paid: $199,098.92

Total cost of your loan when paid in full: $399,098.92

Payoff date of the loan is reduced by: 6 years!

In this example, you see that you have not just cut into the amount of interest that you are saving by an outstanding savings of nearly $56,000 but you also have cut out the time that you will be repaying your loan down to just 24 years instead of the full 30 years. That savings can be figured out for your specific loan by using a mortgage calculator. You simply need to calculate what an additional payment per year will do to your loan.

Check out this Mortgage Calculator from

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