PERKONGSIAN rakaman video pelakon Erma Fatima sedang meraikan majlis istimewa pengumuman jantina bayi dalam kandungan adiknya iaitu Betty Rahmad mencuri tumpuan netizen.PERKONGSIAN rakaman video pelakon Erma Fatima sedang meraikan majlis istimewa pengumuman jantina bayi dalam kandungan adiknya iaitu Betty Rahmad mencuri tumpuan netizen.
How to Save Money on Your Mortgage
Jared Paul
Jared Paul, CFP, CIMA January 26, 2018
Buying a home in your youth is not necessarily the best course of action. However, if you've already purchased a home or are planning to in the near future, there are strategies you can use to potentially save thousands of dollars over the length of the mortgage.
A Mortgage Can Double Purchase Price of a Home
The amortization schedule for a mortgage can be shocking. An amortization schedule is a long financial statement included in the loan document that shows all the payments you’ll make over the course of the loan. It also includes the total amount of principal and interest you will pay. Over the course of a 30-year mortgage, it isn’t uncommon for the total you pay the bank, including interest, to amount to double the purchase price. This can have a big drag on your ability to build wealth over the course of your life. Luckily, there are some interesting strategies you can potentially use. (For more, see: Understanding the Mortgage Payment Structure.)
Make Additional Principal Payments Each Month
In the book, “The Banker's Secret” by Marc Eisenson, he discusses a strategy called “pocket-change prepayments.” The concept is based on making additional principal payments each month to decrease the amount of interest you pay over the life of the loan. By doing this you also shorten the length of the loan, meaning you make payments for a shorter period of time.
Making principal payments isn’t a groundbreaking concept. People have been talking about it for a long time. In fact, Eisenson’s book was published in 1990. What is interesting is how much you can potentially save by doing this. There are two main strategies to implement:
1. Send in extra money each period to pay down your principal faster
In this scenario you will have to come up with more money each pay period, but this will have a significant affect on your savings.
2. Set up your payments to debit biweekly instead of monthly
In this scenario you will be making more payments throughout the year, although they will be for a smaller amount, which will increase your total annual payment.
Monthly: 12 Payments
Bimonthly: 24 Payments
Biweekly: 26 Payments*
*Two extra payments each year.
An Example of Pocket Change Prepayments
For this example, I’ve eliminated taxes and insurance to focus solely on the loan numbers and to account for differences from one part of the country to the next. (For related reading, see: Mortgages: How Much Can You Afford?)
Home Price: $252,500 (Current median price of a single-family home in the U.S.)
Interest Rate: 3.92% (Mortgage rate data)
Terms: 30-year fixed
Down Payment: 20%
Your monthly payment would be $955.09. The total interest you would pay over the course of the loan would be $141,830.87, bringing the total cost of the home to $394,330.87. In this scenario you will have paid over 56% more than the actual price of the home, and this is with mortgage rates near all-time lows.
Paying Extra on the Principal
In the first strategy you pay extra on the principal. If we pick $100 extra per month as our agreed upon amount, what would happen?
Interest Savings: Over $26,000.
Time Savings: Four years and 10 months less of payments.
Making Payments More Frequently
In this strategy we are looking to make payments more frequently. Instead of making a once-a-month payment of $955.09, you pay $477.54 every two weeks. The key is to make sure your bank allows this and that they are properly crediting the payments so they amortize on this new schedule. You don’t want them to hold your money until the end of each month and then credit it all at once as if you had made only one payment. This won’t provide you any benefit.
Interest Savings: $22,771.
Time Savings: Four years and one month less of payments.
These savings come from a relatively small increase in payments and a very low interest rate. For those with more expensive homes and higher interest rates, the positive effect will be even greater. This same principal can also be applied to other forms of debt, including credit cards, auto and student loans. (For more from this author, see: 3 Reasons Why You Shouldn’t Buy a Home.)
Read more: How to Save Money on Your Mortgage | Investopedia https://www.investopedia.com/advisor-network/articles/how-save-money-your-mortgage-altering-your-payments/#ixzz5VKUM5rpV
Follow us: Investopedia on Facebook
Tidak ada komentar:
Posting Komentar