How to Pay Off A 30 Year Mortgage in 14 Years and 11 Months

Here’s an example of a 30 year fixed interest rate loan and a 15 year fixed interest rate loan.

$200,000 house

– $7,000 down payment

$193,000 loan amount

30 year loan fixed interest rate of 3.850%, your monthly payment is $904.80 (principal and interest).

15 year loan fixed interest rate of 3.850%, your monthly payment is $1,413.13 (principal and interest).

Your monthly payment on a 30 year loan is $904.80.

Your monthly payment on a 15 year loan is $1,413.13.

The difference between the monthly payments is $508.33.

If you sent the lender $508.33 extra every month, the term of your loan is shortened to 14 years and 11 months. AND you saved $71,343 in interest.

TIP: When you send in any extra payments, make sure you send a letter and write on the check, “APPLY TO PRINCIPAL ONLY.”

Make Extra Payments

Example of Making One Extra Payment a Year:

$200,000 house

– $7,000 down payment

$193,000 loan amount

30 year loan fixed interest rate of 3.850%, your monthly payment is $904.80 (principal and interest).

Your loan will be shortened to 26 years.

You’ll save $20,771.62 in interest.

I could provide dozens of examples, but there are online calculators that will help you decide what fits your budget and you can create your own plan to reduce your loan term. visit this website for further information here

TIP: Check your account often. Most lenders or mortgage companies offer online services. Make sure your extra payments are not applied toward interest or going into your escrow account.

Bi-Weekly Payments

I’m not a fan of bi-weekly payments. Here’s why:

– When you set up a plan with your lender, you’re committed to making bi-weekly payments. What if your car breaks down and you don’t have the money to make the bi-weekly payment?

– A bi-weekly mortgage plan equates to making one extra payment a year.

– A bi-weekly plan generally shortens your loan term by four to five years.

Rather than committing to a bi-weekly payment, consider sending 1/12 more than your monthly mortgage payment every month. If your mortgage payment is $1,200, send in an extra $100 every month (applied toward principal). The result is one extra payment a year, same result with a bi-weekly payment plan. Except one huge advantage — you’re not obligated to do so!

Another reason I don’t like bi-weekly payments (especially ones that are not set up through your lender) is because when you don’t send a full mortgage payment, the mortgage company puts your money into a “suspense” account. They keep your money in a suspense account until they receive an amount equal to a full mortgage payment. This gives the mortgage company way too much power over your money. I’ve seen many occasions when the lender fails to apply the money in a suspense account, or they apply it incorrectly. Trying to get a lender to apply your money from a suspense account is worse than going to a dentist. Every day. (No disrespect meant to dentists.)

Tax Refunds, Inheritance, “Extra Money”

If you get a tax refund, send a portion or all of it to your mortgage company, write a note on the check that the money is to be applied to principal.

If you receive an inheritance or get a bonus from work, you can do the same thing, send it to your mortgage company.

Before you use your tax refund, inheritance or bonus, check out some other options to grow that money first. You can use a save investment that will give you compound interest on your investment. If you invest your money for one year, then at the end of the year, your money has earned interest. Send the interest you earned to your mortgage company, of course, telling them to apply it to your principal.

TIP: You might consider digging into your retirement account to pay off your mortgage. There’s pending legislation now that would eliminate penalties for taking retirement money out to pay for a home loan. I highly recommend you do not do this. Most Americans don’t have retirement accounts or very little money in a retirement account, or retirement accounts that will not have enough money in them when you’re ready to retire.

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