I bought my home 4 years ago, It is a 30 year mortage, intrest at 5.86 fixed. I pay $400 a month on a minimum of $350 a month.... I paid 46,000 for the home and I have about $40,000 left on the loan....Why is it taking me so long to pay it off and should I remortage??? Everyone tells me I would not find better intrest than I have now....I'm just wondering, how can you buy a car for $40,000 and get it paid off in less than 10 years but my house will take me 30!!!??? Please help, I'm confused. What do I need to know and do?
2007-10-09 10:27:21 · 5 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
It's taking so long because it's a long-term loan (30 years). It's early in the loan term and you're still paying more interest than principal. To pay it down quicker: each month, pay whatever additional amount you can afford along with your regular payment and mark the second amount "apply to principal". This is the simplest way to immediately reduce the amount of interest you owe for all succeeding months, and to quickly get you to where your monthly payments are mostly tackling principal rather than going to pay off interest.
Remember that each month, you have to pay 1 month's interest on the entire outstanding principal. So any additional "apply to principal" amount you can pay, even just once, affects every monthly payment thereafter, causing less to be required for interest, and more to be paid to principal.
If the terms of your mortgage contract forbid or penalize paying down the principal early, you might try asking your current lender whether you could refinance at the same rate, but for 15 years, or 10. A 15-year mortgage costs much less in the long run than a 30-year, and the difference in monthly payment is not that much.
2007-10-09 10:54:01 · answer #1 · answered by igglydooble 3 · 0⤊ 0⤋
What the loan is for has ZERO effect on how long it takes to pay off. The interest rate and size of payment are the determining factors. Use and online calculator to find out what the payment would be on a 10 year loan for your current balance at your current interest rate. If you pay that amount each month, your home will be paid of in 10 years. You do not have to refinance to do this. Simply pay extra and indicate the extra should be applied to principle.
2007-10-09 12:00:54 · answer #2 · answered by STEVEN F 7 · 0⤊ 0⤋
The only way to pay it off faster is to pay extra principal. Increase your payment a little more and the principal will drop quicker. A 30 year mortgage is just that.....a 30 year loan.
Your interest rate is really good. You would not gain anything by refinancing.
Paying $6000 in principal in the 1st 4 years is actually pretty good. Many people pay $0.00 due to the type of mortage that they have.
You borrowed $46000 and you currently owe $40000. The only way to pay it off "ASAP" is to cut them a check for $40000 right away. Assuming that you do not have $40k laying around, the easiest way to pay it off is to pay extra principal every month. It will still take a while to pay it off but it will get paid off. My 30 year loan is on track to be paid off in 12 years. 12 years is still a long time but much shorter than 30.
2007-10-09 10:44:55 · answer #3 · answered by Wayne Z 7 · 0⤊ 0⤋
Don't pay off your home early. Here's why. 5.86% fixed is a good, low interest rate, and your interest is tax deductible.
The stock market makes on average twice that. So, instead of paying off your home, you should put any extra $ per month into a good diversified portfolio of stock equity funds. You will make a lot more money this way. That's how rich people do it.
Good luck!
2007-10-09 10:36:49 · answer #4 · answered by Laeticia 4 · 1⤊ 1⤋
If you pay an extra 400 a month that will take about 7 years off your mortgage. They more you pay the faster you will pay it off.
2007-10-09 10:38:15 · answer #5 · answered by scottsmylie 5 · 0⤊ 0⤋