Posted on: 12th Jun, 2010 11:17 am
can i pay off my mortgage early without penalties?
it depends. most mortgage companies will require your to pay early pay off penalties if you refinance or pay off your mortgage before 3 yrs.
pre-paying your mortgage is one of the biggest mortgage secrets out there. pre-payment is an interesting topic, the reason being is that you can save yourself a great deal of money by doing so and shortening your mortgage life span tremendously. all you have to do is check your loan contract to see if you have a pre-payment clause in it that allows you to pay down your mortgage quickly with little or no effect.
many mortgages allow a borrower to pay down their mortgage substantially, which can sometimes cut their mortgage payment time in almost half, assuming you do not have a adjustable mortgage rate. if you want to pay off your mortgage early all you have to do is this; get out your mortgage amortization schedule, and if you don't have one you might be able to get it online, or you order it from your lender for a few dollars. once you get it open it up and look at your payment schedule. you can see from your 1st mortgage payment to where you are right now into terms of the last house payment you have made. your payments has a break down of the principal and interest, and it give you a break down of how each payment is applied in terms of principal and interest.
what you will notice is that in the first few years on your payments, a tiny amount of your payments are going to the principal balance, most of the payment is going towards interest. that just how mortgage loans are set up due to the length of time it takes to pay off a mortgage. now look at this, lets say you have some extra money and want to start cutting out some of the years on your mortgage payback. lets say you have had your mortgage around 2 years now, and you have just made your 23rd house payment. so on your next payment(the 24th payment based on your amortization schedule)all you have to do is send in your regular payment, and in different envelope mail in the next principal payment amount for the next payment, or for the next 10 payments. all you have to do is on the payment that you are paying early, just put in the "memo section of your check," "this payment is to be applied to my principal payment for payment(s) #25(or what ever principal payment number that the payment(s) is for)." when you do this 2 things happen. first, you have just avoided paying future interest on those principal amount that you have decided to pay for now; so you don't ever have to worry about paying that interest amount anymore because you have just paid the principal early.secondly, for the principal amounts that you pay now, early, you take those many months off your mortgage payments in the future. the earlier you start doing this with your payments, the more beneficial it is for you in the future. the reason is that you pay more interest in the earlier years of your mortgage on a regular loan, and when you do this early you can reduce your mortgage payments by years, and build equity really quickly. another example, lets say i have a $1,500/month mortgage and i am now getting ready to pay my 5th mortgage payment but i want to wipe off 1 year of my 30 year mortgage; all i would have to do is send in a payment for my 5th payment of $1,500 in one envelope, and in another envelope i would send in another payment for my principal payments for my 6th-17th principal payment amount and put that in the "memo section" of my check , to be applied to future my principal payments #6-17. just by doing that i have just reduced my mortgage pay back time by one whole year
pre-paying your mortgage is one of the biggest mortgage secrets out there. pre-payment is an interesting topic, the reason being is that you can save yourself a great deal of money by doing so and shortening your mortgage life span tremendously. all you have to do is check your loan contract to see if you have a pre-payment clause in it that allows you to pay down your mortgage quickly with little or no effect.
many mortgages allow a borrower to pay down their mortgage substantially, which can sometimes cut their mortgage payment time in almost half, assuming you do not have a adjustable mortgage rate. if you want to pay off your mortgage early all you have to do is this; get out your mortgage amortization schedule, and if you don't have one you might be able to get it online, or you order it from your lender for a few dollars. once you get it open it up and look at your payment schedule. you can see from your 1st mortgage payment to where you are right now into terms of the last house payment you have made. your payments has a break down of the principal and interest, and it give you a break down of how each payment is applied in terms of principal and interest.
what you will notice is that in the first few years on your payments, a tiny amount of your payments are going to the principal balance, most of the payment is going towards interest. that just how mortgage loans are set up due to the length of time it takes to pay off a mortgage. now look at this, lets say you have some extra money and want to start cutting out some of the years on your mortgage payback. lets say you have had your mortgage around 2 years now, and you have just made your 23rd house payment. so on your next payment(the 24th payment based on your amortization schedule)all you have to do is send in your regular payment, and in different envelope mail in the next principal payment amount for the next payment, or for the next 10 payments. all you have to do is on the payment that you are paying early, just put in the "memo section of your check," "this payment is to be applied to my principal payment for payment(s) #25(or what ever principal payment number that the payment(s) is for)." when you do this 2 things happen. first, you have just avoided paying future interest on those principal amount that you have decided to pay for now; so you don't ever have to worry about paying that interest amount anymore because you have just paid the principal early.secondly, for the principal amounts that you pay now, early, you take those many months off your mortgage payments in the future. the earlier you start doing this with your payments, the more beneficial it is for you in the future. the reason is that you pay more interest in the earlier years of your mortgage on a regular loan, and when you do this early you can reduce your mortgage payments by years, and build equity really quickly. another example, lets say i have a $1,500/month mortgage and i am now getting ready to pay my 5th mortgage payment but i want to wipe off 1 year of my 30 year mortgage; all i would have to do is send in a payment for my 5th payment of $1,500 in one envelope, and in another envelope i would send in another payment for my principal payments for my 6th-17th principal payment amount and put that in the "memo section" of my check , to be applied to future my principal payments #6-17. just by doing that i have just reduced my mortgage pay back time by one whole year