Is there a way to pay off your house in less then 30 years?

Question

I was told that you could cut about 18 years of paying by doing the folowing:(just an example)
Lets say you have to pay $850 of mortage and of those 850 only $80 go towards the price of the house, so if you give $80 extra the next month, they cant charge you interest for the next month since you already paid the $80 that was going towards the house. IS THIS TRUE!!!????

Answer 1

The way it works is that you have the option (on every form you send back to the lending company) to put more money towards principal (to reduce how much you owe on the house) or interest (to claim a greater deduction for your taxes). You have to make more than the minimum payment, though.

Here's an example. Let's say you have a 30-year fixed mortgage, and a monthly house payment of $700. Of that, only about $20 (in the first few years, anyway) is actually going towards reducing the principal of the loan. The rest goes towards interest, homeowner's insurance, and property taxes.

Now, let's say you have some extra cash on hand. There's a box on the side of the return form for your mortgage payment that says, "Extra payment amount to:" and then has some spaces to fill in dollar amounts for taxes, interest, or principal.

If you send in a check for $800, you can say that the extra $100 you're sending goes towards principal only. When you payoff the principal earlier, you pay off the house earlier. And you don't have to keep paying interest on the loan when the principal is paid off. So, your house is paid off earlier.

Ta-Da!

All you have to do is pay more, and decide where that money goes, and you will pay off your house sooner.

Answer 2

You can shorten the length of the mortgage by making additional payments. These payments will lower your outstanding balance, which interest is charge on. Therefore, each following payment you make will have (a little bit) more going to the principle.

You might also want to decide if it is worth paying it off early. I have decided not to. My rate is fixed at 5.625%. Technically, it is even lower because of the tax benefit. I feel I can do better things with the money. For example, I can save/invest the extra money, so in the future I can add on to my house would taking an equity line at 8%.

Answer 3

I have heard of the 15 year mortgage but the payments are higher. I did see though that if you pay more toward your mortgage then the minimum you can cut down your years. That is what I saw when I read the offer our mortgage company was offering ( bi-monthly payments) to cut thousands of dollars off our loan and years. But I saw that if I just paid the amount they suggested that the bi monthly totaled to then I could still save as much but not switch over to their bi- monthly payments and so crunch myself to pay twice a month instead of once.

Answer 4

If you make an extra payment during the course of the year, you will cut about 7 years off a 30 year loan.

Answer 5

You'll pay your loan off quicker if you can send extra money a month towards the principal. Since the majority of your payment is going to pay interest (If you've looked at your amortization table you'll see how much of the payment is actually going towards the principal)

Answer 6

you could refinance and cut your payments down to 15 years instead of 30 years.

You can make out a check with extra money going towards the principal..make sure you mark it principal only on the bottom. That way they can apply to the real balance and not put any into interest.

Answer 7

I just bought a house and they told me to pay off the loan in less than 30 yrs just send more than what your house payment is and that will help to shorten the length of time on the loan.

Answer 8

To break your mortgage in half is by making an extra mortgage payment each year.

So if your mortgage is $600.00 - you can either pay an extra $50.00 per month or pay the full $600.00 within the year.

Before you know it - you have taken ownership of your mortgage.

I hope you have found some value in what I've shared.

Peace,
C.F. Jackson
http://www.WontBeDenied.com
Won't Be Denied! Because What I Want MATTERS

Answer 9

Never heard of that. But I learned you should make a double payment in December. Doing that effects the interest and shortens the life of the mortgage.

Answer 10

Yes, you can do that. But the interest is actually on the outstanding loan amount. it reduces Interest build up.