By Samia Jamal
Mortgage loans are one of the most essential liabilities in today's world. On one hand this is the only way a middle class family or the average consumer can afford to buy a house and on the other hand he/she has to pay a massive amount of money while paying off the mortgage.
Mortgage loan terms in general vary from 20 to 30 years. If you do your math properly then you would understand that while you are paying off your mortgage amount over the term of your loan, you are actually paying for nearly three houses; one for yourself and two for the bank. At the end of your term you have paid the principal amount and the interest amounting to double the principal. As an example, if you borrow $100,000.00 at 7% interest for a 30 year term, the monthly payment comes to $655.00/per month, which accumulates to $239,760.00 after 30 years. You end up paying $139,760.00 just as interest. The sad fact is, many people they keep going with what the bank gives them as rates or they go with the automatic renewals that the banks offer them, without shopping around for better rates or even trying to understand the different mortgage products out there.
There are multiple ways of reducing the mortgage loans, a few of which are briefed below.
- Refinancing mortgage - Though this is an old method but still proves useful when your mortgage interest is higher than the current rate of interest. You can refinance you mortgage loan and avail the benefits of lower interest rate. This reduces your monthly payments and hence you are able to make pre-payments more frequently.
- Eliminate unnecessary PMI or MIP insurance premiums - PMI (Private Mortgage Insurance) and MIP (Mortgage Insurance Premiums) are both same and are applied to all those mortgage loans in which the borrower pays a small amount upfront as down-payment. These charges are levied monthly and carry throughout the loan term. People are not aware that these charges last till 78% of your principal is remaining. So post this period these charges can be posted towards the mortgage thereby reducing the term.
- Paying mortgage loan ahead of time - The monthly mortgage payments can be broken down into weekly or bi-weekly payments. Since the interest calculation is based on daily basis you gain on interest as well as you make an extra payment in a year. This is due to the fact that for a bi-weekly payment you earn 1-2 days every month and over the period of a year you make 2 extra payments.
- Mortgage line of credit - The latest trend that people follow is to use the line of credit as your daily account of usage. Due to daily interest calculations, the more you reduce your principal the more your gain. The way is to make monthly big payments to your mortgage which is your line of credit and draw money from it when required. This drastically reduces your term and you save huge on interest.
Samia Jamal is a specialist in cutting down people's mortgage debt. What sets us apart from other plans is that our plan reduces the years of amortization with absolutely no increase in your present debt payment dollars! Get out of your death pledge (in latin mort=death, gage=pledge). Please visit our website to find out you can pay off mortgage sooner or later. If you've asked yourself: how to payoff mortgage fast, then you've come to the right place. Fill out our online questionnaire for a free no obligation consultation about our mortgage reduction program.
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