TIPS FOR BUYERS

 

Many know that a mortgage is a great way to buy a house. But, quite often, many don't realize just how much a mortgage can drastically run up the cost of owning that home.

If I told you that I would sell you a $200,000 house for $364,813.42 you would never do it, but a 30 year mortgage can run the purchase price of a house up $164,813.42 in interest at 4.5% over a 30 year mortgage.

Just know, their are ways to reduce that number that are simple and within reach. If you're shopping for a mortgage, make sure you have the option of "PRE-PAYING PRINCIPAL" without penalties. Let me show you how this works.

Let's start with a $200,000 mortgage with the first payment beginning JANUARY 1st. Interest is loaded on the front of your mortgage, so your early payments are predominately interest.

EXAMPLE:
Payment one is $1013.37. Of that, only $263.37 is paid on the principal. The remaining $750.00 is interest. On month 2, your second payment is $1013.37 of which $264.36 is principal and $749.01 is interest.
So, in two months, you have paid $527.73 in principal and $1499.01 in interest. NOW, if you add the principal of the second month with your first payment you can skip the interest on payment two. So, on JANUARY 1ST you would pay $1277.73. That eliminates $749.01 in interest from your loan.

Now, in February, you would make payment 3. Payment 2 has been paid with the January payment - minus the interest which you won't ever pay. In February, if you paid the principal of month 4, $266.34, you can skip the interest of $747.03.
In two payments, you have reduced your overall mortgage costs by $1496.04 in interest. If you repeat that every month throughout your mortgage, you can radically reduce the overall interest costs of your mortgage. :)

Dream it - Buy it -Live it