mortgage advice & help

 

Home Mortgage & Refinance Help And Advice

Attn: Special Rates Available Until For Residents Of Virginia & Neighboring States!
 

There is Nothing Like Owning Your Home Free And Clear

It is every home owner's dream to own their home free and clear.  What a relief to not have a mortgage payment.  There is an inherent push to pay the loan off early to attain that goal even sooner.  But wait, it may not be the best investment of your current funds over time.  In reality, there is no rush.   Another thing to remember, most people have better credit than they think, usually Fair Credit or better, keep this in mind while filling out our online form.   When contacted by us, kindly ask our loan professional any question you may have.  They will be more than happy to assist you in making sure the loan you want is the loan you need and is best for you.   Remember, all loans don't fit all people;   if you need a mortgage loan, we'll find the right one for you.  Please click "Full Application" to get started.

The Interest Paradox

In an interesting twist, paying off your mortgage early does not necessarily save you as much as you might expect, according to Mortgage Advice & Refinance Help given by About.com.  That is because the payments you make in the early years of your mortgage is made up of mostly interest. As time goes on, more of your payment goes towards the principal and less towards interest.  Over a 30 year loan, it takes:

  • 8 years to pay off the first ten percent of your principal.
  • 15 years to pay off sixty-seven percent of the interest.
  • 20 years to pay off eighty-four percent of the interest.

If you pay off your mortgage early, you gave your lender an interest free loan with the interest you paid in.  Add to that some lenders follow their amortization table instead of recalculating the interest, and you can have really paid in to them and not on your loan.

Paying your mortgage off early can still save you tens of thousands of dollars, but if you had put extra money into a money market instead, the bank would be paying you interest, helping cut down the total amount of interest they got from you in the mortgage.   You save money and increase your total net worth while still paying off the mortgage.  That sounds more like a win-win situation.

mortgage advice and help

Cash and Investment Returns

Fear of not making the mortgage payment drive the two most common reasons that home owners want to pay their mortgage off early:  they want a safety net in case their income is reduced or goes away, and they don't want to have a mortgage payment when they retire.  No one wants to put their home at risk, and this seems the safe way to do it.  But investing has safety net options too.

You can build up a portfolio.  The securities in the portfolio can easily be turned into cash should you need it.   Cash is a good thing.  You can spend it on anything you need - groceries, car payments and your mortgage payment, as it were, while you are collecting an unemployment check.  Even better, if your portfolio gets large enough, you can make those payments and keep the cash.

If you don't have regular income, getting a loan for the equity in your home can be difficult.  The bank still wants you to pay your money back.  But with cash generated from your investments, you are paying yourself for being smart.

Legitimate Reasons To Pay Off A Mortgage Early

There are some legitimate reasons that paying off a mortgage loan ahead of time can make sense.  One of those is guaranteed returns.  While historically speaking, investments average an eleven percent year return (you can look that up), equity is a solid return on your money.  It does not give you a very high return, but it's dependable.

Those with a low risk tolerance appreciate that.   It also forces you to save, as your payment increases your equity, which is an untouchable savings account for a period of time.  If you are hard pressed to save on your own, this may be a good reason for you.  It can also be emotionally satisfying to not have that payment hanging over your head.  This is as good a reason as any, as long as what it costs you is worth it to you too.

Tax Implications

Taxes is actually another reason not to pay a mortgage off early.  You can claim the interest you are paying on a mortgage only if you are paying on a mortgage.  You lose the deduction sooner, so evaluate the impact it will have your tax return.

Do It Right

If you are going to pay off your mortgage early, consider these other financial aspects of your life to cover all the bases:

  • Fund your other cash needs first.  These could include retirement accounts or college funds.
  • Start early. That is when you are paying the most interest.   If you wait until later, you are missing out on saving yourself a lot of money.
  • Talk to the lender about a simple interest loan or re-amortizing the mortgage.  It is the only way to really save money on interest.   There may be a fee to re-amortize, says .

When looking at your home loan and mortgage options, Peak Home Loans can assist you in getting the best rates and terms available today.  Regardless of your fair, good or excellent credit status, Peak Home Loans has the knowledge and experience to get you the loan you deserve. If you need help with your mortgage, or advice concerning a home loan, please don't hesitate to contact us.

Rates For The Week Of


Interest Rate Trends

Years you plan to stay in your house   Recommended program

1-3

 

3/1 ARM, 1 Year ARM or 6 month ARM.

Interest Only Home Loans are a very good choice.

3-5

 

5/1 ARM

Interest Only Home Loans are a good choice.

5-7

 

7/1 ARM

Interest Only Home Loans may be an option.

7-10

 

10/1 ARM, 30 Year Fixed, or 15 Year Fixed.

10+

 

30 Year Fixed, or 15 Year Fixed.