Finance MORTGAGE PAYMENTS Do
You Know the Rule of 50/25? You
pay half, but only get a quarter - believe it or not, its how
your standard mortgage payment is computed. Take
a 30 year mortgage, a homeowner making monthly payments for
the first 15 years – half the term of the loan will not have
paid off as much as half the principal (the original amount of
the loan). In
fact, in today’s rate environment less than 25% of the
principal will probably have been paid off.
The bulk of the monthly mortgage payments have gone towards
the interest on the loan.
On
a typical, 30-year mortgage of $100,000, a homeowner will not
actually pay off half the original mortgage amount until year
23. For more than 20 years the majority of the mortgage
payment goes to interest.
By the time a 30 year mortgage is paid off, you will
pay almost three times the original loan amount - that is
three times the original house price! TALK
ABOUT A GOOD RULE TO BREAK ! You can beat the Rule of 50/25 by setting up biweekly mortgage payments, achieving home ownership for thousands of dollars less. Half of the monthly mortgage payment amount is made every two weeks which is the same amount of money you would have spent per month, this reduces the compounding interest. Normally you make 12 payments per year and by paying by-weekly you will make the equivalent of 13 monthly payments per year. Many lending institutions do not want you to, and do not make it easy for you to set up these by weekly payments. Many lenders charge a one time set up fee if you converting from monthly to by weekly payments. The difference is well
worth the effort even if you think you will only stay in the
house for a couple of years, remember you are building equity.
Escape the burden of a 30 year mortgage in 22 years - 8
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