Italian Real Estate

Financial Advice On Mortgage

Posted on | June 26, 2011 | No Comments

If you have a mortgage and have been wondering how your house can work for you a little better then you may want to start some research into . You bought your house years ago and knew you would be building equity but, not that you are the village idiot, you did not quite understand how the equity thing really works.

Equity is basically a savings account. Every time you make your mortgage payment you are contributing to your own savings by increasing the equity in your home. If you are like most Americans, your house payment is close to one third of your entire living expenses every month.

Equity is the difference between what your house is worth and what you actually have left to pay on it. And like I said that difference grows with each and every payment you make. By making small changes to the way you make your payments you can increase that equity and take years of payments and interest off of your mortgage.

If you have just gotten a thirty year mortgage on your new house then this will help you pay that mortgage off in half the time it would normally take. Mortgages are set up to pay the interest first, basically. If you bought a house and received a 7% interest rate and you bought your house for $200,000 you will pay $14,000 in interest the first year you own the house.

The amount of interest and the amount of principal that gets paid adjusts for every month you make your payment on time. This is called an amortization. The last year you have to make mortgage payments will be almost all principal amounts with very little interest thrown in because you paid the interest up front.

Want to save paying all that interest? To do that all you need to do is pay a little extra every month on your mortgage. Any extra gets applied to the principal amount you owe on the house. Talk to your lender and make sure this is the case because sometimes the lender will put extra amounts into an escrow account and not apply them to the principal. So make sure first.

If the extra payments do go toward the principal then even if the extra you pay is only, say, ten bucks a month, you could still shave off six months from the end of your mortgage. Hey, six months is six months. If you want to pay more than that, like, even double payments you could very well take 15 years off having to pay the mortgage. That would probably save you tens of thousands of dollars in interest.

More good is to make your payments twice a month instead of only once. This will increase the amount of payments you make by two a year and you will effectively take four years off your thirty year mortgage.

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