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If you have a 25 year mortgage (like most people) do you realise it's not a fixed term. You could go longer or pay it off earlier. If you inherited some cash you could pay off a lump some.
If you have a 25 year mortgage (like most people) do you realise it's not a fixed term. You could go longer or pay it off earlier. If you inherited some cash you could pay off a lump some. If you had a monthly payment of about 500 you could decide to pay 540 instead every month. What do you think would happen if you did this for 25 years? We'll use a 100,000 mortgage as a test. We have a 25 year term and a 5% interest rate. We pay about 580 per month and end up paying a staggering 175,000 back in total. Now, using the same figures we would pay just 20 per month extra to make a rounded 600 a month. Our new total payback would fall to just under 170,000 we save an extra 5 thousand. And we shave a year and a half off the 25 years. I know it doesn't sound an awful lot over 25 years but using a mortgage overpayment calculator we can play around with the figures and see what happens if we could pay just a little bit more. Here's an example if we were to overpay by 50 every month. Ame example figures, but this time we pay 50 extra every month we get nearly 4 years shaved of the term and 12 thousand in cash, saved. Mortgage overpayment calculators are a powerful tool that allow you to see how better off you could be later on. Better off you could be, not the lender. Another example using bigger payments than we've used so far. Let's keep the same figures, 25 years at 5% with 100,000 borrowed. We'll overpay an extra 100 a month. This gets us a saving of over 20 thousand and it knocks over 6 years off the term. That's some serious savings in time and money. An extra 100 per month isn't easy you say. And over 18 years it's an extra 23 thousand you've shelled out in overpayments. Think about this though, for the remaing 6 years after your mortgage is clear you don't have to pay 680 every month. Think about how much this means to your pocket. You might be shocked at the amount of savings you can make when you play with a mortgage overpayment calculator. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Monty Burn published a bestselling book called the Mortgage Bible, download your copy at his site Mortgage Watchdog or have a play with the mortgage overpayment calculator and shock yourself at how much cash you could save. |