Mortgage Term Articles




Mortgage Term Articles Summary

Early Payment Discounts
The dream of owning a home is becoming very allusive these days. Although everyone would like to have a home that is paid for free and clear, many people are forced to assume mortgages that will be paid over 25 or 30 years into the future. Everyone is constrained to a certain degree by their budget. Yet there is a way to pay off the existing mortgage on your home quicker and save money in the process. By applying early payment discounts, you can save a considerable sum of money over time. Almost all mortgages have built into them an Accelerated Payment Clause. This allows the borrower to pay more than the minimum amount of the monthly mortgage payment. To do this you simply remit more to the lender than the usual mortgage payment every month. The benefit to this is that every extra dollar paid against the mortgage will lower the outstanding balance of the mortgage. This increases the equity in your home faster over time. Also, by lowering your outstanding balance, you will save on interest charges.
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Mortgage Term To Suit You
For years, banks and financial advisors have been recommending that you pay extra cash into your mortgage, to cut down the huge interest amount and reduce the period, or mortgage term, over which you pay back the loan. For example, if you borrow $200,000 with a mortgage term of 30 years at a rate of 5%, your monthly repayments would be around $1074. Over 30 years, you would actually pay $1074 x 360 (months), which is $386,640. That's $186 640 in interest! If you could find an extra $246 a month, and pay $1320 a month into the mortgage, you'd cut 10 years off the mortgage term - the loan would be fully paid in only 20 years. Moreover, your total payments would be $316,664, saving $69,756! The flaw in this technique is that it ignores the time value of money.
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