Article On Fire

There's a good reason for the growing movement among homeowners to pay off their mortgages early. The longer you stretch out your payments, the more you lose in interest costs.

For example, assume that you have a $150,000 30 year mortgage at a 7% interest rate. By making only one extra payment a year, you would save a whopping $58,332.93 over the course of the loan and your mortgage would be paid off almost seven years earlier.

Properly utilized, the return on mortgage pre-payments beats almost any other no risk investment that is available today.

To use pre-payments to their maximum benefit, you should consider the following.

Your mortgage should be recent, with a rate of 6% or higher.

Take five to seven years off your 30 year loan! This bi-weekly payment program is advertised for fees of $400 and $500. Why? Why should you throw away $400?

In the case of bi-weekly payments, the mortgage company flashes your savings at you, making you think the "magic" is the bi-weekly payment.

Consumers think they're saving on interest because they're making a half payment two weeks early. But that is not true. If you read the fine print, you'll see they don't even credit your account bi-weekly.

You can also devise your own pre-payment schedule by simply adding whatever extra payment you wish to your monthly mortgage check.