Aqualane Shores is an exclusive waterfront community in the city of Naples Florida located between Port Royal and Olde Naples.
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There are a couple of ways to cut down the amount of time it takes to pay off a mortgage.
Buying a home is an exciting time for most people.
The first home is usually the most exciting buy, but many people who have bought and sold more than once find that each new home purchase can be an adventure.
One of the daunting things about buying a home, though, is the sheer length of time a mortgage is set up for.
A ten-year term is often the shortest for a home loan, but they are usually set up with a 25 or 30 year repayment schedule.
The first of them is to come up with a bigger down payment. Generally speaking, loan companies want a person to come up with at least 10 percent of the cost a home as a down payment. I
f 15 to 25 percent can be raised as a down payment, it will result in a lower monthly payment and, sometimes, in a lower interest rate.
The second, and best, way to take advantage of the lower monthly payment is to get a mortgage that allows additional payments each month and does not penalize for buying out the mortgage early.
Some mortgage lenders add a stipulation to their loans that say that people can make all the extra payments they want, but a large fee will be added to the balance if the buyer wants to pay it off early.
It’s better for the home owner to have the ability to rid themselves of a mortgage payment faster, but it is not better for the lenders.
They make their money off of the interest payments and when a person pays down faster, they lose out on a lot of money in the process.
To discourage applicants from choosing mortgages that allow an early buyout and extra payments, the interest rates are usually higher on these flexible loans.
However, even with a higher interest rate, the ability to pay a home loan off more quickly without penalties is a boon.
For instance, a 25 year mortgage with a monthly payment of five hundred to six hundred dollars would only need an extra monthly payment of one or two hundred extra dollars to shave five to 10 years off the principal amount owing in only a year or two.
The reason this is possible, even with a higher interest rate, is that all additional payments are immediately put toward paying down the principal balance.
As the principal balance is reduced, the monthly interest is also reduced until the interest calculated each month is almost non-existent.
It’s fairly easy to manage a low monthly mortgage payment and an extra payment each month when a person is currently paying double the mortgage payment or more on rent.
It’s not the way mortgage brokers and lenders prefer to do things, but it certainly is preferable for a homeowner to be done with housing payments earlier.
