Should I Pay My Mortgage Off Early?

Should I Pay my Mortgage Off Early? This is actually a FAQ – a frequently asked question, so I thought I’d spend a little time on it here. Some other mortgage-related topics we’ve addressed are these:

  • How Much House Can I Afford?
  • Your First Home Purchase
  • How Much HouseMortgage Can I Afford?
  • Using an IRA for a First Home Purchase
  • The Fifteen Year Mortgage

A Mortgage Example
Let’s use a sample mortgage. $400,000 borrowed, at 4.5%, over 30 years. The monthly payment is $2026.74. That means over the life of the mortgage you will have paid $729,626.85 in principal and interest payments to repay that $400,000 loan – and, of course, $329,626.85 of that amount is interest.

You pay interest each month on the unpaid balance. In early years your payment is mostly interest, with very little principal repayment. In later years, situation reverses: you pay mostly principal, with much of the interest having been paid in the earlier years.

Using our sample mortgage,...

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The Fifteen Year Mortgage

This is a really good FAQ – a frequently asked question. Instead of taking out a 30-year mortgage, should I take out a 15-year loan? How much more are the payments? How much would I save? Can I afford it? Great questions all.

A Sample 30-Year Mortgage
Let’s use a sample mortgage. $400,000 borrowed, at 4.5%, over 30 years. The monthly payment is $2026.74. That means over the life of the mortgage you will have paid $729,626.85 in principal and interest payments to repay that $400,000 loan – and, of course, $329,626.85 of that amount is interest.

You pay interest each month on the unpaid balance. That means in early years your payment is mostly interest, with very little principal repayment. In later years, situation reverses: you pay mostly principal, with much of the interest having been paid in the earlier years.

Using our sample 30-year mortgage, in the first year you will have shelled out $24,320.88 – your monthly payment times 12. Of that amount, $17,867.98...

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How Much Mortgage Can I Afford?

In the previous installment of this 2-part series, I discussed how you can prepare yourself for a mortgage application in terms of your credit report and credit score. In this installment I’ll talk about most lender’s criteria for lending to you.

Where can you get a mortgage?
You may obtain a mortgage from a commercial bank, a savings and loan institution, a mortgage company through a loan originator, or even a private individual.

How much will they lend you?
To answer that, let me give you a term and define it. The term is PITI: Principal, Interest, Taxes, and Insurance. PITI is, in other words, the out-of-pocket expense that it takes to keep you living in the home you buy. PITI also includes association maintenance or condo fees.

Mortgage qualifying ratios
Lenders use two qualifying ratios in determining how much mortgage you can afford. They will loan you 28% to 36% of your monthly gross income for PITI expenses, and 36% to 41% of your gross income for PITI plus other...

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Your First Home Purchase

So you’re getting ready for your first home purchase. This is the first in a two-part series. The second is entitled, How Much Mortgage Can I Afford? To qualify for a mortgage you need a good credit score.

Down payment and qualifying for a mortgage
In buying your first place you’ve got two main considerations: Coming up with a down payment is number one. Number two is being able to qualify for a mortgage loan. In this post, I hope to help you get ready to obtain your first mortgage. Specifically, you’ll learn how to get a good credit score in order to qualify for a mortgage.

Good credit is accurate credit
Your first project is to make sure that your credit report is accurate. I say project, because it may very well be just that – a project. There are three major credit bureaus: Experian, Transunion, and Equifax. Each time you make a reportable event with one of your credit grantors – say Macy’s – that event shows up on your credit report. So...

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