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NO, it won't, and shame on you as a real estate agent for making such an assertion. It would only cut the time by less than 4 years.
Quote:
Originally Posted by FalconheadWest
Why didn't you just do a 15 year mortgage if you were going to be this obsessive about paying it down?
One extra payment a year will wipe out several years of interest. I had always heard it's 7 years. I have never heard it was anywhere near 13 years like it written above. So you don't need to make obscene amounts of extra payments to reduce interest.
Well, I don't know who your sources are but obviously they had no idea what they were talking about.
Try plugging in the OP's numbers in to the calculator that I linked to and see for your self.
As for why the OP didn't choose a 15 year mortgage it is most likely because he can't afford the much greater monthly payment each and every month but can afford to pay something extra each month an thereby cut the number of years down but not all the way to 15. DUH
If you can afford to pay an extra $679 per month, you will cut your mortgage term in half to 15 years. If you pay an extra $333 per month, you will cut 10 years off of your mortgage. Some people simply like to not have a mortgage, but you should consider what other investments you might be able to make with the additional money. As suggested, play around with some mortgage amortization calculators to determine what might be best for you.
My wish for you - May your new home often be blessed with the joy of much shared laughter.
I used the calculator and by following the OP's numbers and by just paying an additional $325 a month the OP can shave off almost 10 years of debt. $650 a month retires the debt in April of 2030 based on a first payment in January of 2015. $1,400 a month extra would pay off the loan in 10 years.
If the OP's goal is to retire the debt than a second job for 10 years would do it.
Like others I would make sure that the 401K is maxed out.
The interest barely surpasses the standard deduction+personal exemption....so unless she has a lot of other deductions (home office is perhaps the biggest single IRS red flag, besides being a Republican), that's really not helping her. One extra P % I does turn a 30 into a 16.....being from Richmond, she should know that Phillip Morris Dividends are a bit more of a sure thing than the sun coming up.....Chevron/ConocoPhillips are both paying over 4% now, too. The experts loved Chevron at 135 in the Spring, but won't touch it at 103 today.....nothing new there. Looks like the former governor is going to get 10 years of free housing....lol, good riddance.
Thank you very much Guys for chiming in. sorry went to take a look around the house this morning - I like it .
The reason I din't chose for 15 years is because I felt that's a lot of commitment, and in case something goes wrong financially, I will be in trouble. I liked the flexibility of 30 years, and at 3.875, I thought I was getting a great deal.
As far as taking a personal loan goes, I am very comfortable asking that money from my uncle who is a doctor. well, I am an immigrant, and I took a loan of $30K from him when I came to US to do my masters 8 years ago, and repaid him in 3 years. 0% interest rate of course, and I hope the next loan will also have the same interest rate . reason why I am contemplating the same route.
I looked at the bank rate calculator over, and over, and under all combination that I tried, I felt that the first 7 years are the killer when bank sucks all the money out of you. for my case, I will pay about $67K in interest for that time period, while my principal will only reduce by a pantry $30K. all these assuming I make minimum payments. even if I add a few extra hundred every month (about 300), the interest is still overwhleming. however, if I make an extra payment of say 70K (I understand this is a big risk as well), I save 17K at the end of 7 years in interest.
I am really not thinking of how soon I can pay off the house. I am comfortable having the loan for a long time, I just want to pay less in interest. so whey the principal is 80% of my monthly payment, I don't mind paying the minimum mortgage.
also, I am 33 years old, so retirement is not really anytime soon(I hope it was possible though
I still plan to contribute about 8-10K a year to my 401K, can't max it out if I go down this route - so that's the compromise I am willing to make. my understanding is, the stock market isn't going to do much in next 2-3 years. but hey, all the pundits fail miserably in their predictions, so what do I know?
Decide what you can cut out of your daily living expenses (3 lattes a week? Etc) and pay that amount added to your payment. Shoot for $50-100 a month to start.
Just closed on my first house ever today - feeling ecstatic, and scared at the same time!
It's not an expensive house by any shot - but in a great location with great school assignments, in west end of Richmond, VA(for the people who know this area). $324K Purchase Price, made a down payment of $66K. 30 years fixed@3.875%.
I have been looking at the amortization table since I came back from closing :-)It appears to me that first 5-7 years really is when I make insane interest payments. This is the time period where banks suck all the money out of me.
I hate paying interest to bank! My thought is, I should try to save every penny possible, without stressing out, and affecting my lifestyle and make as many extra payments as I can initially. I am even thinking to request for a personal loan from one of my wealthy relatives, like $50K in a few years, and dump it to the mortgage. once my principal to interest ratio is like 75:25, I will just make the minimum payment and invest my savings elsewhere. since from that point, the interest will be negligible.
Am I thinking in a logical way? Am I missing something obvious? or there is a better way to attack your mortgage?
Looking forward to all your valuable advise!
thanks again.
SB
Congratulations on your first house. You were smart enough to do a fixed interest rate. Congratulations again. Enjoy the tax benefits for the first fifteen years. Unless you are renegotiating the terms of the loan, any prepayment of of principal is an interest free loan to the bank. Personally if I was going to make a 50K payment of principal it would have to pay off the loan.
Just closed on my first house ever today - feeling ecstatic, and scared at the same time!
It's not an expensive house by any shot - but in a great location with great school assignments, in west end of Richmond, VA(for the people who know this area). $324K Purchase Price, made a down payment of $66K. 30 years fixed@3.875%.
I have been looking at the amortization table since I came back from closing :-)It appears to me that first 5-7 years really is when I make insane interest payments. This is the time period where banks suck all the money out of me.
I hate paying interest to bank! My thought is, I should try to save every penny possible, without stressing out, and affecting my lifestyle and make as many extra payments as I can initially. I am even thinking to request for a personal loan from one of my wealthy relatives, like $50K in a few years, and dump it to the mortgage. once my principal to interest ratio is like 75:25, I will just make the minimum payment and invest my savings elsewhere. since from that point, the interest will be negligible.
Am I thinking in a logical way? Am I missing something obvious? or there is a better way to attack your mortgage?
Looking forward to all your valuable advise!
thanks again.
SB
Check to make sure there are no prepayment penalties on your mortgage.
Also don't go with no emergency fund or forgo putting at least 10% of your income towards retirement.
Otherwise I'd say go for it! (But not the loan from relative part - this risks a ruined relationship...)
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. reason why I am contemplating the same route.
Start small and grow
