How to Determine Early Mortgage Payoff
Mortgages can range from five to thirty years. The terms of payment vary with time and so does the amount of money you will eventually pay for your home. A thirty year mortgage at around 5% APR can make a pay more than twice the price over a long time period.
If you have one such mortgage and want to get rid of it early, you will have to calculate an early pay off and the amount of money you will be saving. This is an important decision as you will have to pay more than what you have been paying.
Instructions
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1
Financial Conditions
Have a look at your financial conditions before you decide whether you want to make an early pay off or not. It is a big financial commitment as you will be paying more than you are used to per month and unless there is an increase in the income, it may not be a very good idea. It is useful to pay the mortgage off early when you have little or no debts apart from it. -
2
Contact Lender
Some lenders have a clause for a penalty for an early payment as they want to have a maximum amount of earnings from the interest that you will be paying over the length of your mortgage. If there is no such clause, it is a good idea to go ahead. -
3
Calculate Savings
Now this is slightly complicated to be done by hand so ideally go on the internet and use one of the calculators that are available on various websites that calculate the amount you will pay overall and how long will it take you to pay off the total debt.
Make good use of them and see which payment plan suits you best. The more you pay above the minimum payment, the fewer amount of interest you will have to pay. If you pay five hundred dollars more a month, the next monthly payment will have the interest calculated on five hundred dollars less. This is an excellent idea to do if you can afford it and will save you a large amount of money at the end of the day.
