Money Lessons

Ok, time to hit a financial issue with you girls. My mind is loaded with these especially when related to housing issues. I wonder why? ha This weeks hint is how to pay your house off sooner, or at least build up more equity sooner.

If you have a 30 year mortgage and the mortgage company will allow you to make payments twice a month (1/2 when the payment is due and 1/2 in the middle of the billing cycle), depending on your interest rate, you can have that 30 year mortgage paid off in 18 to 21 years. Think of the interest that has saved you! By making 1/2 payments twice a month, it is equivalent to making an extra payment per year. If your mortgage company won't allow you to pay that way, send in extra money with the one payment. For instance, if you can send in an extra $100 a month with your payment (and be sure to write on the check that the extra is to be applied to the principle, i.e. $100 extra principle) that would be paying an extra $1200 a year down on your principle. I know I did this on our last house and when we sold it, I had saved 6 years of payments and had that much more equity in the house than I normally would have had if I had only paid the normal payment. Be sure to keep good records of the extra you pay and each year when you get your statement from the mortgage company showing what you owe that the amount has been applied.

Always when you take out a mortgage, make sure there will not be a prepayment penalty should you decide to pay if off sooner than the length of time on the original loan. Also note, making an extra payment per year does NOT allow you to skip a payment! And, last, I know you could put that extra $100 a month in savings and use it to pay off your house later, but honestly, how many are that disciplined to do that. A hundred dollars sent to a mortgage company is a savings that you can't cheat and take it out and it is earning you the interest rate that you are paying on your house since you are saving that much interest a year.

Next Money Lesson will be to explain why you should never buy a house and live in it 30 years to pay it off.

Have a wonderful and Blessed weekend!