7/28/2008

So You Want to Pay Off Your Mortgage Faster?


Like these guys, we would all like to find a way to save money. But what will it cost?
Today I received a nice letter from my mortgage lender inviting me to pay off my loan 61 months sooner by making payments twice a month. I would save thousands of dollars in interest. I couldn't agree more. All I have to do is enroll in a special plan where half of my regular monthly payment would be taken directly from my account, for a total of 26 drafts a year, which would be sent to my mortgage lender. On the second page of the mailer, there's a nice chart showing my remaining balance for the next 29 years, the new plan balance, and the equity growth I would gain each succeeding year until the entire balance would be paid off at the end of year 24.

But--couldn't you just pay more principal when you want to? Why does this plan want $375.00 from me to set up automatic withdrawals? First of all, you don't have to pay anything extra to pay down your principal, and second of all, $375.00? Didn't that used to cost $150.00 or so for those who were actually willing to pay for the service? That's probably because the people at the outside insurance agency which sets it up want their cut, too.

Paying principal down is good, but right now, I need that $375.00 for gas. I can just write in an extra amount in the principal column on the monthly statement for free.

4 comments:

Anonymous said...

Hello

I really enjoyed reading your blog. In fact recently I bought my first home and I used sites like yours to learn about the process and real estate in general. I also learned that a home inspection is probably one for the best things a home buyer should do before the deal is finalized. I had the guys at http://www.homeinspectionspecialist.com inspect the house for me and they gave me a detailed report of the house and showed me things I would have never known or found. Anyways I look forward to all the updates. Thanks again,.

Jessica

Julia Huntsman said...

Jessica, you don't say where you bought or if you used a Realtor or not, but you're right--a home inspection is very important. What about all your other contingencies?

Jim Johnson CRS said...

I enjoy following your blog! The Bend Oregon real estate market continues to slow. It looks like a good time to buy in your market.

Julia Huntsman said...

Jim, thanks for following along. It is a good time to buy here, and some people are finally beginning to discover that!

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