Your Questions About How To Pay Off Mortgage Faster

Mandy asks…

Paying off your mortgage faster.?

I have been researching how to pay off my 30 year fixed mortgage faster. I have found a lot of information on paying one extra principal payment a year. what if I were to make four extra payments a year? Would I get close to a 10 year payoff?

richmama answers:

Depends on the interest rate and the term left in the loan.

Daniel asks…

how can i pay off my mortgage fast without changing any of my current spending habits?

I have been looking into this HELOC (Home Equity Line Of Credit)plan. Which is: You open a HELOC, which is a revolving account that comes with a debit card and a book of checks. Say your home is worth 80,000 and your current balance is 75,000. Well, you can get a HELOC of 5,000. You dont spend this money. You just leave it where it is. This is where it gets interesting. When you get paid you start using this HELOC account as your checking account. Say you get paid 2500 every 2 wks. When you make your deposit of 2500. Your daily periodic balance that you will be charged interest on is going to be 72,500. As you pay your bills and living expences for that 2 wk period you may only have 500 dollars of the 2500 you put in. This will leave you principle at 74,500 for the remainder of the 14 days of intrst . You get paid again. Put another 2500 in this account. You again leave 500 in, and you make a house payment of 700. Which has been in the account the entire time anyway. Will this work?

richmama answers:

The HELOC usually has a much higher interest rate than your mortgage- around 8% or so…

Instead try taking any extra money that you have and putting it into a mutual fund… Over time it should grow at a faster % rate than your mortgage interest rate, so you should be able to pay it off earlier than if you’d just sent those extra monies in on the mortgage right away.

John asks…

Is it really possible to pay off my 30-year fixed rate mortgage in 5-7 years?

I saw a so-called expert on a news broadcast this morning who said people in Australia and Europe have discovered a way to leverage their debt and finances in order to pay off their home mortgages at a faster rate without changing their monthly payments. How is this possible? It was quickly suggested that a Home Equity Line of Credit (HELOC) was the secret, but what does getting more debt have to do with eliminating debt?

richmama answers:

Yes, it’s possible. But it may not be advisable.

A HELOC is the secret. Without getting into the details, you’re not borrowing more money. You’re using the HELOC like a checking account, shifting money (from your paycheck into it), then paying the mortgage out of it. And the sophisticated software that you pay for also tells you when to make additional contributions.

The systems I’ve seen cost something like $3,500. The argument is that you’ll save that much in interest in the first year. And maybe you will. But it is expensive up front. The only real requirement (other than perhaps your ability to obtain a HELOC in today’s credit environment) is that you have a monthly positive cash flow…that your income is exceeding your expenses. The numbers don’t work if you’re going into debt every month.

You can accomplish something sort of similar–not as efficiently–by making extra principal payments on your mortgage every month. Like I said, the program I’m familiar with is a lot more efficient, but it’s pricey.

Hope that helps.

Paul asks…

pay off mortgage tips?

i have two mortgages on is in foreclose and the other one isnt how can i pay off my mortgage that is not on foreclose faster and will it affected me if i have one of foreclose. will the forecloser company get after me for not pay that one and paying of the other mortgage. and i also dont want the house that is on foreclose any more because i owe more than what the house is worth currently trying to sell that house. what do you recommend

richmama answers:

Your question is very confusing and not clear… But here we go anyway!

It sounds like you own two houses and have two mortgages (one mortgage on each house). One of those mortgages is in foreclosure (for a house you no longer want because you owe more than it’s worth). The other mortgage is current (in the house you are living in and want to keep).

Mortgages, in general, are secured debt. They are secured by the house that you bought with the mortgage. It is not standard to have any further rights in a mortgage than foreclosure (it can happen, though). About the only way they can come after you is if they can prove that you were trying to cheat them when you got that mortgage (fraud).

If you let the house go to foreclosure, your credit will be absolutely trashed for several years. You might want to see if you can negotiate a short sale on that house (with that lender). A short sale won’t trash your credit like the foreclosure would.

I recommend a short sale on the property you don’t want.

Make an extra payment per year on the one you want to keep and pay it off up to 8 years early.

Good luck!

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Your Questions About How To Pay Off Mortgage In 5 Years

Sandra asks…

How much more do I have to pay to pay off a 30 year fixed mortgage in 5 years?

I have a brand new loan and my first pmnt is June 1st. My monthly payment is $499.29. How much more do I have to pay to pay off a 30 year fixed mortgage in 5 years?
Loan Type and Term; 30 Years Conventional
Original Principal Balance $100,000.00
Contractual Remaining Term 30 years
Interest Rate 4.375%
Current Principal Balance $100,000.00
Principal and Interest $499.29
Interest Paid $11.99 YTD

richmama answers:

You should pay $1849.57/ month as EMI to complete the loan in 5 years. Use PMT formula in excel.

Carol asks…

Paying off my mortgage in 5years instead of 10 years?

I owe about 109,000 in 10 yrs mortgage, how much more per month would I have to pay to have it paid off in 5 yrs vs the 10 yrs?

richmama answers:

The $2107 per month answer, from the other gentleman, is correct. You can download software that I wrote, which will work for free for 5 days, to run different scenario’s.

I also wrote an article that describes how to do the mortgage calculation, if you are interested.

Helen asks…

How practical is it to have a mortgage paid off by age 30?

Lets say it’s a mortgage for a $95,000 condo with 25% down payment and ~6% APR. The monthly association fee is $250.
Lets say I make $40,000 a year (pre-tax) and live relatively cheaply, so I can pay extra on my mortgage every month.
How practical is it to have it paid off in 5-6 years?

richmama answers:

Here is a tool that may help you. Its a mortgage calculator provided by Coldwell Banker Hubbell Briarwood. You can find it at http://www.cb-hb.com/mortCalc/calc.html and can also be added to any website. Hope this helps!

Richard asks…

If I get a cheap condo and have it paid off in 5 years, then what do I do?

I’m 24 & have been saving a lot of $. I currently make $30k/yr, and I would like to buy a condo that costs $60-70K My goal is to have it paid off within 60 months.
I should be able to put down 20-25 %, so I won’t have to pay mortgage insurance. Also, I live rather cheaply, always looking for good deals, and paying for all purchases (vehicles, etc) in cash.
2 questions:
1) How practical is it for me to have it paid within 60 months?
2) If I don’t have a mortgage payment once I am 30, what do I end up doing with all the money I’m not putting towards a mortgage/interest? (it almost seems too good to be true?!?!?!)
Thanks for your insight!!!

richmama answers:

I was you a couple of decades ago. Thought just like you too. It’s a lofty goal. You’re going to quickly discover home ownership comes with a host of other costs which will utilize your disposable income. Here are some examples:

— Interest (instead of making interest on your savings, you’re now paying a bank interest charges for lending you the money).
— Property Taxes
— HOA fees (you did say Condo)
— Utilities (except for trash collection which your Condo HOA fees will cover).

If you still think you have enough extra money to pay down Principal over 60 months… Then you haven’t a woman in your life. And, trust me on this, when you own your own place a woman will find a way to your heart… And then take over your dwelling. And, when this happens, you won’t have ANY money left over to pay more than the regularly scheduled mortgage payments (i.e. Over 30 years).

Edit: Did some calculations for you….
For a 70K place with 20% down, you have a 56K loan. You can get a 5% 30 year fixed rate in todays market. To pay that loan off in 5 years (60 months), you’ll need to pay $1056.79 per month in P&I. This is 42% of your gross income. You’ll need $700 a year in property taxes (i.e. $58.33 / month) and the HOA fees.

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