want to pay off 30 year fha fixed home loan in 5 years?

Question

since i want to do this. would it be smart to make payments to principals only? are can i do that?

Answer 1

Yes, you can. I would write on the payment coupon that your extra payment is for principal, not interest.

Good luck!

Answer 2

Triple up on the P & I portion of your payments and you should pay it off in 5 years, give or take a couple of months. Make sure that you enclose a note with EVERY payment telling them to put the excess against principal. Otherwise they'll just dump it into your escrow account where it will do you no good at all. (Extra payments are never put against interest. That just would not make any sense.)

FHA loans don't have pre-payment penalties so you don't have to worry about that.

Answer 3

Whoever you are working with... FIRE THEM! You need to be working with a good realtor who is willing to take the time to explain all of this stuff to you slowly and clearly. There is a LOT of information, take your time. It looks to me like: - The $595 a month you are paying is going towards the "principle" (the amount you borrowed from the bank) AND the interest on your loan. That is what is paying your loan down over the next 30 years. - Real estate taxes do go up, but if your only paying $52 a month, your taxes are really low and probably won't go up too badly. - Home insurance is required and yes, you can get it from anywhere. Talk to a local independent insurance agent. (Look 'em up in the phone book) - PMI = Private Mortgage Insurance. You are paying an insurance policy that basically pays the bank back if you die or default on your mortgage. The PMI doesn't do you any good. You should prefer not to have to pay it. However, if you have less than 20% equity in your home (the value of your house is not 20% greater than the amount of your mortgage) you are required to pay for PMI. You can (and should) stop paying for the PMI after you have 20% equity in your home. P.S. You only need 1 bathroom if you don't have any kids and it really is just you and your fiancee living there.

Answer 4

This would definitely be smart to do...You should check your mortgage agreement and note to see whether there is a pre-payment penalty. Most banks do not want to have their loans paid off for within the first couple of years (as they would not be earning much money on a front-ended loan) so they add a pre-payment penalty to the loan.

Also, I would check with your lender to make sure that when you do make payments to principal, they are aware of that fact (ie. that you are making payments to the principal).

Hope this helps...

Check out TaxSaleWealth
http://www.taxsalewealth.com

Answer 5

You should definitely not payoff your mortgage early. Here's why:

Let's say todya you have a house worth $150,000 appreciating at 3% a year, your mortgage Balance is $150,000 and your interest rate is 6.5%, then a 30 year mtg payment is $948. If you decided you would like to pay your mortgage in 5 years, you would need to send an additional $1987 a month. i'm not sure about your particular situation, but this example will fit any FHA situation.

First things first, you need to understand the tax implications you face by spending an additional $1987 a month to your mortgage. You receive no additional tax benefit with your mortgage company and the money you are using to pay down your mortgage has been taxed. Let's say you are in the 25% tax bracket: that means that $1987 is really $2649 that could be invested in a 401k or other pre-tax investment.

If you were to continue to pay you regular payment on your mortgage, you'd continue to get the tax return for interest paid, but you could invest the $2649 pre-tax and have an account with $211,000 in it 5 years from now if your pre-tax investment grows at the national average of 9.3%. This would mean that in 5 years your net worth would be $234,000. If you simply paid off your mortgage, your net worth at the time would be $173,891 (estimated value of your home).

If you did payoff your home, you'd free up $2935 pretax to invest. 10 years from now, you'd have a free and clear home, an investment balance of $176,000 and a net worth of $386,000. Sound good? Not as good asthe guy that didn't pay his mortgage off. 10 years from now, his net worth would be $595,000; $110,000 more than if you paid off your mortgage.

Also keep in mind a few other factors that I didn't insert but will only hit my point home further:
1. If you keep your mortgage, you get another write off that I didnt' factor into the above scenario.
2. If you did in fact invest the additional money into a 401k, most employers match 1 to 1 up to a certain amount. 1 to 1 means a guaranteed 100% rate of return. think about that... 100%.
3. Even if you didn't take advantage of pretax investments and you simply invest the extra $1987 in an after tax money market that grew at 7% (easy), your net wworth would be $2,000 higher in 5 years than if you paid off your mortgage and you'd be $35,000 ahead 10 years from now.

The numbers don't lie. if you'd like to call me with more information and like to see if you are properly leveraged, you can visit my website CaseyCasperson.com and contact me from there if you think you need a more personal mortgage tune up.

Answer 6

Yes, if you pay extra amounts, more than your payment that is due, the extra will go toward principal. Good luck.