If you’re like most homeowners, you have a mortgage that is paid in terms of a monthly plan. You know that you can afford to pay the monthly fees and you think that they’re quite reasonable; what you likely don’t know is the total amount you really end up paying after you finished making the monthly payments for your mortgage.
As an example, assume that you bought a house and the initial principal for the mortgage you took on is $250,000.00 payable for 30 years. It is given a fixed interest rate of 7.5 per cent annually and monthly payments of $1,750.00, after doing some simple math you find that you will end up paying almost $630,000.00 for your home. If you look at it the amount you will pay for the interest alone is bigger than the initial principal amount; almost one and a half times that in fact. This is a lighter scenario; if you do not act quickly you could end up paying up to 4 times the original price.
And to add a little more gravity to this already daunting reality, during the first few years of your mortgage most of your monthly payments is just to pay off the interest; a minute portion of the payment will actually go to paying your actual debt. In average, it takes about 24 years in a typical 30 year mortgage so that more than half of the monthly fee goes toward paying for the property.
It can be quite depressing if you think about it. but fortunately there is a way to take away years from your mortgage payment, actually reduce your debt, and save you money in interest.
Opting for an automated bi-weekly plan in paying for the mortgage is not only practical it is actually re-inventing the homeownership landscape. Instead of monthly payments the lender will automatically draft from your checking or savings account every 2 weeks. This translates to roughly 12 monthly payments plus an additional month that directly goes into paying off your debt.
Under this plan, when you make the same $250,000.00 loan as before you only end up paying less interest; almost 30 per cent less. And the original 30 years until your home is truly yours debt-free will be reduced to just 23 years.
This plan is definitely more practical than the monthly payment schemes, but most people wouldn’t even consider this because of the higher monthly expense. But if you look at it from a different angle you will actually be spending a lot less money in the long run. With a little discipline and living a bit more frugally then you will be able to pay for you mortgage quite easily.
Make your life a whole lot easier by taking control of your mortgage, and put the huge amount of money you will save to other uses.