What Do You Do About Your Mortgage??

Updated on May 16, 2014
M.M. asks from McKinney, TX
118 answers

Ladies,
My husband and I had a deep conversation this morning about our home mortgage, and we'd like to know what the norm is. Do most people get a 30 year loan for their house? Do they pay any extra each month? We know that by paying extra each month, or making two half-payments per month, one could save a lot of money in interest, but we don't think that most people do that. What do you do in your household? What do you think the average American does regarding their home loan? We are Dave Ramsey listeners and also really like Crown Financial Ministries.

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So What Happened?

I don't think I worded my question to get across the answer I was looking for. But great responses, thank you so much! We actually are going to be paying off our home in way less than 15 years and are debt free except the house already! Great job to all you other responders that are debt free and making extra principal payments as well!

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M.R.

answers from Denver on

I have a 30 year fixed mortgage and pay extra each month toward the principal. Here is an amortization calculator I use from time to time to see how much money that is saving me in the long run.
http://www.bretwhissel.net/cgi-bin/amortize

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S.S.

answers from Wichita Falls on

I LOVE Dave Ramsey.

And Mary Hunt.

Love them, Love them, Love them.

My husband and I are renting now, so prepaying the mortgage isn't an issue, but in order of the most important things - financially:

NO MORE CREDIT CARD SPENDING
1. Contingency Fund (3 - 6 month basic living expenses in a liquid asset)
2. Savings (and investments)
3. Giving (10% to what you believe in)
4. Pay off Non tax benefits debt (everything but house and student loans) - Mary Hunt's RDRP is awesome for this visual.
5. Pay off the house.
6. Pay off the student loans if you still have any.

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T.W.

answers from Dallas on

Hello Jessica,
You are absolutely right. Most people don't pay that extra every month, but they should. You have to pay it separate though and mark it "principle payment" or if you make one extra note a year makes a big difference as well. You guys are being very smart to want to do something like this. It will pay off.

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S.S.

answers from Scranton on

Well, we are in our current home for 7 years. We have had an 80/20, an Arm and a 30 year fixed. All advice was taken from mortgage lenders, but in the end they all bit us in the butt. A friend introduced us to Dave Ramsey's way and hooked us up with Churchill Mortgage where we are currently refinancing into a 15 year fixed with an interest rate of 4%. This company not only guides you on the mortgage, but takes into account all your other debt.We are definitely on the right track now and will have tons of equity in our home within 5 years. Meanwhile the value of our home is increasing which means more equity. Listen to Dave's advice, we have paid off about $10,000 in debt this year and FINALLY see a light at the end of the tunnel. As Americans, we too had the mentality to buy on credit. Our wkae up call was when my husband was out of work for 8 months with a medical problem. We realized we could have lost everything.God Bless Dave Ramsey for sharing his wonderful knowledge and all those like Churchill Mortgage that also share and help others.

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C.F.

answers from Chicago on

First of all let me just say, everyone's situation is different.

I am a mortgage broker and I believe in doing what is best for the customer!

Most go with 30 year mortgages and have NO DEBT FREE DATE IN SITE! Banks want you to have a mortgage for the rest of your life, how do you think they stay in business!!
RATES ARE GREAT RIGHT NOW, however Refinancing means starting all over again! Is that in your best interest?? Yes sometimes it is, sometimes its necessary because you just have too much debt and this is the only way you can make your budget, and sometimes NOT!! LOOK AT YOUR TIL (TRUTH & LENDING STATEMENT) from the last time you purchased your house or refinaced. You agreed with the bank that you would pay back DOUBLE of what you borrowed on your 30 year term, and that would be at a rate of 6%, did you realize this? Pretty scary and yet Americans continue to refinace every 3/5 years and never get ahead. Lots of responses have said pay your mortgage twice a month, that is a good idea, however you CAN'T just do that, you have to be set up in a bi-weekly mortgage, check with your bank, because some banks charge you THOUSANDS of dollars to do this. You can make an extra payment per year and it will knock 7 or so years off of your mortgage, or you can divide your mortgage payment by 12 and pay 1/12 extra each month to your current monthly payment and that should also knock about 7 years off your mortgage. 30 years is security for most, however it really is SECURITY FOR THE BANKS!!
Right now in the mortgage industry banks are charging higher interest rates for 15 year mortgages than a 30 year, why do you think that is??? If you choose to refinance because rates are lower right now, LOWER THE TERM of the loan, OR DON'T REFINACE, because when you refi, very little principal is paid in your first 10 years of the loan, it is ALL INTEREST, those who understand interest are destined to earn it, those who don't WILL PAY IT!!! To calulate how much interest you really pay each month, take your mortgage amount, multiply that by your interest rate and divide that number by 12, THIS EQUALS HOW MUCH INTEREST YOU REALLY PAY EACH MONTH, and how much goes towards principal. I really do believe you should pay off your debt in this economy and mortgage is debt, and if you can pay it off sooner rather than later, how will that make you feel?? Don't worry about what everyone else is doing, do what is best for your family! Like I said, I am a mortgage broker and an agent with U1st Financial, and we teach people how to pay down their 30 year mortgage in half the time and eliminate 50% or more of their interest! So ask yourself, what are my financial goals?? Do I have a action plan, am I prepared for obstacles, do I want to be mortgage free and debt free and release myself from the bondage of debt, and how much money am I currently investing for retirment?
Everyone has advise, opinions, etc, in the end, the choice needs to be right for your family, because everyone's personal sitution is different. These are just my opinions, and if you would like my mortgage opinion on your personal situation, feel free to contact me at [email protected]____.com people when employed can afford to pay more principal to their mortgage, however they generally don't because they go buy something else that they probably couldn't afford, however they justify it, because they can make the minimum monthly payment! If you change your budget in little ways it will make a HUGE DIFFERENCE!! Buying coffee and fast food, would save the average family $50 to $100 or more each month, there is your extra $100 a month towards principal, and 7 years taken off your mortgage, amazing!

GOD BLESS!! HAVE FAITH and turn to God for your economy!

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B.T.

answers from Dallas on

There are several options for paying down your mortgage:

One: the best option is a 30-year (FRM) fixed-rate mortgage; that stabilizes your future right there. Never take an adjustable rate mortgage (ARM); only the bank wins on that one; the payment goes up and down with the economy; it's probably the option that has caused a lot of the recent harm, the balloon payment that can pop up when the economy is hard-hit.

Two: you can pay an extra principle payment each month. I pay an additional $100. a month, which is $1200 a year off the top. For many years, I paid $50. a month extra, and in the past year I have doubled that, realizing how much time I could cut off from the mortgage if I could just handle the extra payment. You can set it up for automatic withdrawal, if you have your mortgage paid that way. Depending upon how much extra you can afford to pay, it can be a significant savings over the life of the loan, and yes, many are doing this these days.

Three: you can shorten your mortgage life by paying an additional payment every year, a 13th payment, which will take off about a third of the life of your loan.

Four: you can set up your mortgage to have it paid every two weeks, which also affords savings on interest paid, based on the timing of the payment.

So there are several ways to do this; research them before you decide what works best for your family. Then be sure your mortgage terms don't have a penalty for early pay-off, (and many mortgages do not.)
Best wishes!

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A.H.

answers from Chicago on

We actually found a new company called UFirst financial that can take your current mortgage and all your other debt and pay it off faster than making extra payments or anything like that. It's amazing. Check it out at www.u1stfinancial.net/allanhaggar It can help most people wherever they are--even if they've already started with something else. It works. 2/3 of homeowners in Australia already use it and about 1/2 of homeowners in England use it too and they save on average about $100,000 more than their American counterparts.
I hope this helps you even more than the other great advice your received.

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D.D.

answers from Detroit on

Just thought I would add my 2 cents... In these uncertain times a 30 year fixed is probably the best option - you can pay extra to reduce your loan term when you have the money available. With a 15 year you will be required to pay the fixed monthly payment which allows no flexibility if your financial situation changes. Some mortgages will charge a fee to allow you to make two payments per month. Some mortgages only adjust the principal and interest at the end of the year instead of each time a payment is made which affects how much your early/additional principal payments are affecting the overall interest. There are a lot of good ammortization schedules available out there, here is one I like http://www.bankrate.com/can/mortgage-calculator.asp it allows you to see how an additional payment will affect your term and your overall interest. I have a 30 year mortgage and always round up my payments at least to the nearest $5 sometimes I have paid an extra $50 currently I pay an extra 0.65 after 4 years, I have taken an additional 1 year off my mortgage. I have another mortgage on another property that I have had for less than two years and I have now paid 10 years of a 30 year on that one (smaller mortgage, higher interest rate, I want it to be gone). Whatever you do just make sure your payments are affordable.

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A.S.

answers from Dallas on

We have a fixed 30yr mortgage, but just by setting it up to be paid 2x per month rather than just 1 x a month, we reduced it down to a 22yr mortgage.

We don't pay any extra per month on the principal (I wish we could afford to b'c you're hubby is right!!!). Essentially, it's one monthly payment divided into 2 smaller payments (one on the 1st and one on the 15th of every month.) It doesn't cost anything to do this, and this alone saves us 8 yrs of interest/payments.

My parents told us this secret, and the banks won't share this with you upfront b'c they lose $$, so you should ask to do this whenever you're setting up your payment plan.

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J.C.

answers from Philadelphia on

I'm late responding but a great site to check out is Bankrate.com (http://www.bankrate.com/brm/rate/calc_home.asp)
They have mortgage calculators w/ amortization tables so you can quickly and easily calculate how putting an extra $xx/month will save you X years in payments and X dollars in interest.

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B.L.

answers from Jacksonville on

I haven't read the responses, but definitely check out www.daveramsey.com. He's taught hundreds of thousands of people how to get out of debt and be in charge of their money, instead of money/debt ruling them. He has a radio show (interesting and entertaining) on 1240 AM (in Jacksonville, NC - I don't know where you are) and he has a tv show as well.

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J.M.

answers from Dallas on

Reba: Your husband is correct however it will take many years. I'd love to chat about a program I represent called U1st Financial. This program will take most 30 year mortgages down to 8-10 years, saving thousands in interest. It is a remarkable program. You can go to my website and view the video about the program: www.propertiesnmoore.com. Also, if you are interested, I could meet with you. The best thing to do is to do the FREE ANALYSIS. It doesn't ask for any personal information like SS# or Bank Accounts. In fact, this program never touches your money. It teaches you what to do and when to do it.

Thanks for your time.

J. Moore - a grammy to a 3 1/2 yr. old and 11 month old!

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J.H.

answers from Dallas on

A 15 year fixed rate is your best bet besides paying cash up front. See www.daveramsey.com. He has a great book called the Total Money Makeover. We started following it back in 2007 and it has changed our lives.

Jen

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M.B.

answers from Dallas on

Dave Ramsey Dave Ramsey Dave Ramsey.
He has a website, he is on the radio M-F 1-3pm on 570 AM. He is on FOX tv in the evening. I took his 13 week class that taught about everything from insurance, debt reduction, credit and of course mortgages. Never do an ARM. He recommends 15 year. IF, you do the extra payment each month, make sure your bank is applying it to principle, and not future payments.
www.daveramsey.com
People call in to his show and ask these exact questions. I highly recommend it.
Good luck.

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Z.M.

answers from Dallas on

hi! i worked in the mortgage industry for 4 years and have taken numerous homeownership and debt classes. this is what i know will decrease your interest nicely: 1) split your payment in half and pay every two weeks. so if your mortgage was 1K, then pay 500 every two weeks. 2)pay one extra payment a year 3) pay whatever extra you can pay a month or year.

extra info: it's nice to build an emergency fund. since you are married you would need to save 3 months worth of expenses as back up. or you can pay at least 1 mortgage payment ahead and then save about 2 months of expenses.
even if you put away $20 bucks a month or $10 it's a start. I put away $50/mo and it came in handy when I went on medical leave and was laid off.
also, have you considered selling any crafts that you might be into? or picking up a part-time job. for example, maybe you could work in a daycare. there is a chance you will get a discount for your child or pay nothing at all.
God Bless~

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E.W.

answers from Dallas on

We have always paid extra on our mortgage until we took the Dave Ramsey Total Money Makeover. Dave says that you should put any extra money you have toward your other debt (credit cards, car payment, etc.) before paying extra on your house. So we now pay extra toward our other debt, once that it paid off we will pay extra toward our mortgage again.

I would highly recommend the Total Money Makeover check it out www.DaveRamsey.com

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S.T.

answers from Dallas on

We had a 15-year loan, but we paid off the house in three years. We lived like paupers to do it, and I wouldn't want to do it again, but it was so worth it! We ate beans and rice (or lentils and rice, or occasionally splurged on lima beans with some ham and rice) two or three times a week, never ate out, packed our lunches, bought second-hand clothes, made Christmas presents, etc. We paid an extra payment every other month, and when we inherited some money from my husband's mother and grandmother, that all went to the mortgage. People said we were nuts, because we could have invested that money at a higher interest rate and come out ahead while we were still paying off the house, but we were more interested in being debt-free than accumulating money. We've since bought me a new car outright (to replace my 14-year-old car that needed some work) and put a lot of money into a college fund for our daughter. Those are things we could not have managed if we had still had a mortgage to pay off.

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L.E.

answers from Phoenix on

I can't remember if we took a 30 or 15 year but we paid extra when buying the home from our savings and extra monthly. We also had extra saved up. I am happy to say we are mortgage FREE. We've been in this house 10 years next month.

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V.F.

answers from Topeka on

Dave Ramsey and Crown Ministries are great. I agree with many responses that the first thing you need to pay off are credit card debts and any other debts that are not deductible on your tax return. I personally like the 15 year loan because the payment is really not that much more, interest rate is usually lower and you can still pay more each month and reduce those years even further. If you do refinance just have them run the 30, 20 & 15 year to find out the payments for each. I think you will be surprised.

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M.Y.

answers from Dallas on

You can save a lot of interest by paying extra. What we did instead in order to pay it off faster and save interest was to pay our mortgage at the first one month and then on the 15th of the month, we paid half of the mortgage. Then on the first of the next month, we paid half of the mortgage. We continued paying half on the first and half on the 15th. It doesn't matter what most people do. You and your husband can agree to do what is best for you. It sounds like he is trying to manage your money wisely. I would suggest taking his lead.
I wish you the best,
M.

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E.B.

answers from Springfield on

We always paid whatever extra we had on our payments. And after 7 years had it completely paid off:)! It does happen!

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K.G.

answers from Dallas on

everyone seems to be in agreement that a little extra in your mortgage payment is a great thing. i'm in agreement too. however, i want to stress that the first thing to do is always to set up an emergency fund. really six months of expenses is the smart thing to do. it doesn't always only take two or three months to find another job....you have to watch that. always have that fund there to start with. then make sure you are out of debt. it doesn't make much sense to pay more on your nice house loan when you have higher interest cc debt sitting there. good luck.

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P.B.

answers from Houston on

If you can afford it - do a 15 year loan, it's not REALLY that much more every month and you're paying off the same debt 15 years earlier!!! It's ALL interest. When we sat up our loan, I ALWAYS rounded up. If the loan and escrow for taxes was $1856, I paid $1900. They adjusted it every year depending on their calculations of what the taxes would be. We had a 15 year loan and it was paid off 9 months early. Just from an average of $50 more a month.

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V.B.

answers from Jacksonville on

There has been tons of great information so far. Just be sure that you research into the loan you currently have and whether any penalties apply, etc. I think that some loans only stop charging interest (on the rec'd payment) after the entire payment for that due date has been received. (Not sure, so check your documents). And the reason you can pay off the mtg approx 7 years earlier (on a 30 yr fixed) is not b/c of paying two 1/2 payments per month, but by paying half payments every 2 weeks year round. There are 26 2 week periods in the year, so in effect, you are paying an extra payment each year. (13 whole payments instead of 12).
Also, beware of some of the literature you can get in the mail offering a "service" to do this for you. There is usually a charge associated with that, and you can do it on your own for free, if you know what to do.
Pay particular attention to how you "label" your payments when you send them in. More times than once I have looked at a statement only to find that the mtg co. did not credit my plainly labeled "extra principal" payment as such, but had applied it into the escrow account instead. Once you call them on it a couple times, they do it correctly apparently. HA
As for what we do, we have a 30 yr fixed (I wouldn't do anything else) with NO prepayment penalty (sometimes prepayment penalties only apply for the first few years of a loan, then drop off- but if you were careful from jump street, there will be none at all). We pay a little extra on the principal each month. Slowly reducing the principal we owe at a higher rate than normal. Even if we could afford to pay enough extra to cut the payments to a 15 year equivalent, by not using a 15 yr mtg, if something were to happen we have the flexibility to pay less (the 30 yr rate) if necessary.
Dave Ramsey's opinion on the 15 yr loan, isn't b/c the 15 yr is set up better than a 30 yr, it's just that his philosophy is that you should only borrow an amount you can afford to pay off in 15 yrs. It's more about your bottom line and not being in debt. Also, the 15 yr usually comes with a slightly lower interest rate than a 30 yr. So if you can easily afford the 15 yr, that is what I would do. Most people however, want the bigger house, so they borrow more to be able to afford it. That is what Dave is tries to get people to see and weigh out. The question is more do you find it worth it in your situation to obligate yourselves to a 30 yr mtg for the bigger house, rather than go with a less expensive home and pay it off and be out of debt in 15 yrs?
Quite frankly, I don't think that paying half payments twice a month is worth the hassle of doing that... paying it bi-weekly is not the same as twice a month. Paying bi-weekly CAN cut your mtg by approx 7 yrs on average (down to about 22 yrs), and THAT WOULD be worth the hassle - since most people will not save that amount and pay it all at once once a year - which would do almost exactly the same thing as far as interest/pay off.
If you just get into the habit of paying an extra amount each month (figure out a number and just do it) you learn to live within what's left. In your mind, your mtg payments BECOME that new number you have devised for yourself. The first few months are the hardest, but once you make up your mind, if you stick with it, you will adjust mentally pretty quickly.
And do the same with a savings account... have an automatic draft from your paycheck/checking each month (write it out of your checkbook as a bill each month if you have to) go into your savings, and don't touch it. After a while you won't really miss it, but it will be there for you if you have an emergency (the car has a hiccup, kid's broken arm insurance deductible and co-pay, etc).

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J.S.

answers from Fayetteville on

The average home mortgage is a 30-year loan. However, I know Dave recommends getting a 15-year loan (you save THOUSANDS in interest and 15 years of "bondage.") Most people just make the payment as scheduled. When you get a mortgage, your lender should give you an amoritization(sp?) schedule that shows what is going to principle, what is going to interest, and what you have in escrow. Personally, I'm a Dave Ramsey fan, and what he has to say about it makes the most sense to me. I'm pretty sure that Crown has the same idea.

Please note, that if you do make any extra payment toward your mortgage, you must make a note on the check that it is PRINCIPLE ONLY, otherwise, it will be applied toward interest. Also, some lenders charge a fee for making 2 half-payments per month (I know Bank of America does.) If you want to make more payments, I would recommend making an extra principle payment, even if it's only $50 or $100.

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K.B.

answers from Dallas on

Your husband is right about saving a ton if you can pay extra each month. Most people probably take out a 30 year mortgage, although 15 year mortgages are popular when interest rates are low. Either way, if you can afford to pay extra each month, it will save you thousands of dollars in interest and you will pay your mortgage off sooner. My husband and I have a 30 year mortgage, but we pay an extra $300 each month. We will pay our mortgage off in 20 years, instead of 30, and save tens of thousands of dollars in interest. We just budget for the extra principal payment as though that was our house payment. Good luck!

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T.M.

answers from Dallas on

You can absolutely cut your interest almost in half if you just pay a hundred dollars extra per month, cuts almost 10 years off of your mortgage. Feel free to visit our web site and use the mortgage calculator to adjust interest rates and extra payments just to see how it would play out. web site is www.bluebonnetteam.net. Mortgage calculator link will be on the left-hand side under the "general" tab. Let us know if you have any other questions! Now is also a great time to re-finance if you have an interest rate about 6 percent. New rates are as low as 5 percent and expected to go lower.
Thanks!
T.

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K.D.

answers from Portland on

My husband and I do Bi-monthly payments. Some banks won't let you do this or they charge a fee. According the David Bach who is a financial genius (You've probably seen him on TV or his books) bi monthly payments do save you a lot of money and pay your house off much quicker! That's what we do!

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V.B.

answers from Dallas on

A 15 year mortgage is not that much more. But if you want a 30 year one and make one extra payment a year, have an amoritization schedule made up to show you how much you save. Also if you just pay an extra principal payment every month, you knock a lot, I mean a lot, off your years to pay and save interest. see, the first few years you are paying a lot of interest and only a little on the principal. Any banker can help you.
Also, they always want you to only pay the payment for 30 years because it makes the lender a lot more money.
We paid our 30 year mortgage off 6 years early and saved over 9000.
V. B.

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C.M.

answers from Dallas on

I also highly recommend Dave Ramsey and his Financial Peace University. You can find a location near you at his website.

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A.M.

answers from Dallas on

We thought we might only live in our home 2-3 years, when we purchased it. We got advice from a mortgage/financial counselor to try this strategy for building the most equity in a short amount of time, and it's worked great for us.

We have an 80/20 loan. The 80 portion is an interest-only loan for 5 years, at which point it converts to an ARM (and before which point we are going to refinance). The payments on that loan are very low.

Without fail every month, we pay a large, extra principal payment (at least double the amount of the smaller loan) directly to the principal on our 20% loan. We'll have paid off the smaller loan within four years, building approx 20% equity in our home. At that point, we'll begin contributing what used to be our 20% payment directly toward the principal of the 80% loan, until it's time to refinance and avoid the ARM conversion.

Does that make sense? I wouldn't recommend this for everyone, because you have to be very disciplined with the extra principal payment every month.

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V.G.

answers from Colorado Springs on

I am a mortgage loan processor. The average borrower, if you can afford to do so, will send a separate check to their lender to put on the principle. Most lenders have a program to pay bi-monthly which is set up with ACH withdrawals twice a month. You must be diligent to have annual audits done by the lender if you chose this option. Some borrowers look for the lowest interest rate that will benefit them and refinance. Paying a payment at 6.5% as opposed to 5% over the 30 years will be a huge savings. Then interest savings is worth doing the refinance.
My husband and I are purchasing the home we are living in from our landlord next month as the rates are great right now or we would continue to rent. Over the 3 years we have been living here we have paid $42,000 for rent at 1275 per month. Benefit to us to rent, zero.

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N.H.

answers from Dallas on

30 is the norm. But your husband is right. Even 50.00 extra can really take years off your note. Do anything extra now and you will be so thankful later.

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C.R.

answers from Dallas on

Paying extra toward your mortgage each month can save you tons of money in interest. But, if you have any credit card debt or car loans, put your cash towards those first. Then, when you are out of debt except for your house you can put any extra money toward your mortgage.

Something else you may want to do is check with your current lender, or any lender for that matter about a refinance. Depending on your current interest rate, a refinance could lower your monthly payment quite a bit. Rates are really low right now and it is a great time to refinance. That alone would free up some money to go toward another debt.

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E.C.

answers from Dallas on

We had grand plans to pay a little extra every month on our 30 year fixed. However, then we started having babies. We cannot afford to pay extra since we need the cash flow right now. I guess it depends on if you can afford it or not.

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N.F.

answers from Buffalo on

We pay 1/2 mortgage every month to equal one extra payment per year, which will pay off our mortgage in 17 years, rather than 30, so YES, it saves a lot of money. You can just send the bank a check(say, from your tax refund) once a year, ask to appluy it to your principal only, and the same thing will happen to you! More people shoudl do this.

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T.L.

answers from Dallas on

My friend & her husband paid extra each month which went toward the principle & they paid off their house in 16 years instead of the 30 it was org. financed for. They sold their house 2 years ago, took the money from the sale of the house (which they doubled from the purchase price) and had a home built, used some of their retirement and the new home on 20 acres is paid for. Since they are now in their mid to late 50's, this is great for them as they both still work & have a nice income. They paid so much less on the house by doing this as they got out of paying thousands in interest.

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S.M.

answers from Dayton on

We have a 30 yr. loan, but make payments as if it were a 15 yr. loan. That way we are paying extra to principal every month, but have the flexibility to lower our payments if we need to.

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P.I.

answers from Dallas on

Well, ours might not be the 'norm' but we don't put our taxes into our mortgage, but pay them seperately at the end of the year (school district, property taxes). Also, I DO pay a little extra each month on the the 30 year mortgage (ranges from $20 - $100) extra so that it will hopefully come close to equalling an additional mortgage payment by the end of the year. That is supposed to shave months or years off your total mortgage...Paying extra is a good idea!

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C.M.

answers from Oklahoma City on

My mom is a CPA, when my husband and I bought our house she told us to make extra payments on the principle when we could. We always made our extra payment equal to the principal that would be paid the next month. By doing it that way we never had to recalculate the amortization, it just knocked a month off of our mortgage. So by paying $50-60 extra each month in the first few years we knocked 1 year of payments off of our loan!

It would be harder to do this as you get farther along in the loan because the amount of principal goes up every month - but you can easily do it for a while.

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S.D.

answers from Dallas on

Reba,
First, hello I am new to Mamasource! I am excited about being able to draw from others experience and such. That being said, I am a mortgage broker(and mom of 4!) and yes your best bet is a 30 year note with additional payments to the principal as you are able. (that way as another member posted you are not broke when you cannot make the additional payment) If you would like to email me a way to reach you, I would be happy to meet with you and your husband and discuss your options. [email protected]____.com

God Bless,
S.

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C.P.

answers from Portland on

If you can afford paying twice a month...do it. Being debt free in your senior years gives one a sense of security. If you can do the rice and beans beans and rice now, while you are young, you will be forever proud and much more secure in your middle age(which comes very quickly, let me assure you.) Banks own you until you are debt free.

House paid for, debt free and 61 years old. Chris RN

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J.G.

answers from Los Angeles on

A lot of good advice out there. 30 years is the norm. Make sure its fixed and not adjustable. And if you can afford a little more go for it. Even $100 a month will take years off your loan! Its what you can afford! That is your guide. Don't pay lots more. Put some away for a rainy day too at the same time.

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C.T.

answers from Dallas on

Your husband is correct, but you have to actually have some extra money to do that. We have a 25 year fixed rate and recently refinanced(before the economic crisis)for a much lower interest rate.

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M.W.

answers from St. Cloud on

Hello,
We took out a 10 year loan. We pay extra on the PRINCIPLE every month as well. WE are a little strapped right now, but we do have an emergency fund set aside too. In the long run, this will be the best thing. GOD SAYS TO PAY YOUR DEBTS!!!! So, that's why we decided to do a shorter loan and pay extra on top.

Most people chose 30 but why on earth would anyone want to be making house payments for the rest of their lives...? I suppose it's so they can have their boat or fancy new car now..... We live within our means. We do not buy vehicles on "credit". We pay CASH for things. If we can't pay for them, we DON'T BUY THEM!!!!!

I also am a SAHM/farmers' wife. I did daycare for 5 years outside of our home but we decided that the extra money was not worth the time our family was missing out on. God has blessed us so much since I've been home full time. But we still have to watch our money and be precarious on our purchases.

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S.K.

answers from Evansville on

Hi M. M,

I am a realtor and the norm for most people is a 30 yr mort. Most do not pay extra or take advantage of bi-monthly payments. My husband and I do the bi-monthly and make an extra payment when finances allow. Any little bit helps save money in the long term.

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A.G.

answers from Dallas on

Dear Reba,

I would say that is NOT the norm, but that does not make it WRONG. In fact, with the number of foreclosures going on, I think I would go AGAINST the norm! We have paid off our mortgage. In this tough economy I am so thankful-- I know that if my husband were to lose his job, we would not have to worry about losing our home. You save a LOT in interest by paying it off early. I don't remember this statistic exactly-- and cannot recall if this is with a 30 or 15 year mortgage, but in the end, you pay about 3 times the price of your house with interest. (So when you are done with your 30 year mortage, you actually have paid about $600,000 for a $200,000 home.) Paying extra pays down the actual balance-- most of your current payment actually goes toward the interest-- so by making your actual principle (balance) on your home lower, the interest will go down. Here is a great website for good financial advice:
www.crown.org
Good luck!
A.

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S.T.

answers from Portland on

When we purchased our house um... 8 1/2 years ago, we calculated things. We took out a 15 yr loan, it cost us a couple hundred extra a month... it hurts sometimes when things are tight... but in the long run saved us about $180,000. It just made sense to us... and now we are at the point where intrest is paid up and all our money is going to principal.. So, our house is finally ALMOST paid off! Goal to pay off the end of this year... my husband took a job overseas for the extra money to accomplish this so we can have the $1,300 from the mortgage payments in our pockets every month... that will be FANTASTIC!

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K.S.

answers from Dallas on

Definitely pay extra on the months you can afford to. Just make sure you make it a completely seperate check and write on it "principle only". It's definitely worth it!

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D.C.

answers from Dallas on

It doesn't matter what the "average" American does about anything. What matters is what is best for your family. We paid off our mortgage early during some good earning years. We are an older couple and the job market has not been good to my husband lately, but because the house and two cars are paid for we can live decently on a LOT less. I am so thankful that my husband was wise enough to see the need to work for the future, not just today.

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H.H.

answers from Cedar Rapids on

It sounds like you are on the right track as are so many of the responses! If you are listening to Dave and following his advice you're making wise decisions. We refinanced from a 30 year to 15 (only a couple hundred dollars a month more, but SOOOO much less interest in the long run) and are making double plus payments as our mortgage is our only debt. As someone mentioned, don't take the advice of your interest being tax deductible if your mortgage is your only debt left, just make sure you're financing your retirement fully before paying off your mortgage. Once your house is paid off financial security is yours, you can make it through most anything without that big payment every month. It sounds like you've bought your house already, but for those who haven't the other bit of advice, don't borrow everything you qualifiy for! Borrow less, live a little less then.....when it's all said and done, you're living a debt free life, no financial worries, and (as Dave says) Live like no one else so LATER you can live like no one else....(early retirement, financial security, quality time with your kids and grandkids...) Good luck! You'll do great!

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T.F.

answers from Dallas on

We do not pay extra per month.

When we built this house in 2000 our interest was 8% on 30 yrs (YIKES). Within a short time, rates dropped so we refinanced and when we did, we PAID DOWN the mortgage.

We did this 3 times to get the rate we have now at 5 3/8 and we are closely watching the rates now. Each time we did a refi, we PAID DOWN the mortagage. Our broker thought we were crazy and now she she thinks differently about our outlook! The focus is to PAY DOWN the mortgage when you refi to make it worth it.

My 4000+ sq ft house payment is lower than most apartment or rental homes but it comes with PLANNING and PREPARATION. I am in a high end neighborhood with one of the higher priced homes/lots and my mortgage payment is less than the average person. We are very deliberate with our expenses, we still have a lot of frills, we are simply planners. My hubby is a numbers man and good at forecasting.

Find a good broker to work with you that you trust.

We are closely watching now and have a broker on call to set a date and time for a new re-fi if rates hit a new low.

We don't have any other debt such as credit cards, loans, etc so instead of making payments on things like that, we PAY DOWN the mortgage when we re-fi.

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H.H.

answers from Kansas City on

Most people get a 30 year fixed loan. It makes it more affordable per month but you can always pay more on your principle when you can afford to but if you have a month that you are short then you just pay the minimum payment. Any amount you can pay extra always helps in the long run. you just have to sit down and figure out what you can afford. Even if you get the 30 year loan and you pay it off in 15 years you will save a lot of interest. Those payments are prorated according to the amount of years and interest rate. Although you probably get a better interest rate on a 15 year loan but if the payment seems too much to handle then go for the 30 year loan but pay extra on it when you can. You don't want to set your payment too high and just barely get by then when a crisis hits you end up losing your home. We figure you would have a payment for your home every month whether you buy or rent so if you figure out how much you would spend in rent that is affordable then look for a house in about that price range and consider it your monthly housing allowance. I don't consider my house payment much into total debt owed. I am more concerned about paying off the other debts we have and haven't paid extra on our mortgage yet but maybe someday when we are debt free otherwise we will be able to pay more on the mortgage payment.
My parents try to pay 50.00 a month extra on their mortgage each month and have seen a difference in the total loan.

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M.H.

answers from Denver on

I think most of the time people just pay the payment on a 30 year fixed--and no extra. Or even worse, they end up with a 40 year or interest only option for all or part. We just recently bought a house, and here is what we are doing. We committed an extra $250/month on our mortgage as well as paying a regular sized payment that first month where you "skip" a payment. Also, my husband gets paid weekly, and we budget on four payments a month. This means 4x per year, he gets an "extra" paycheck. Half of each of those goes to savings and half to our mortgage. So, that helps us cut down our principle quickly. Our goal is to pay off our 30 year mortgage in 15--or even sooner. We will probably look at putting tax refunds to our principle as well. We are excited about the possibility of being debt-free someday (we already have no credit card or car or other debt--only the mortgage is left!) and love Dave's advice.

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S.O.

answers from Dallas on

We have a 30 year loan and pay a little extra each month. Usually because of our payschedule we have an "extra" paycheck during the year and try to put an extra big payment to the mortgage. I'm not sure why it's so important for you to know what other people are doing though. I think everyone has to look at their own financial situation and future goals and act accordingly. There are all kids of people who are paying just the min. and have all kids of credit card debt, but that practice can get very difficult if you lose a job or even need to start paying for college. If you are simply looking for statistics on what peolpe are doing, you'd be better off looking toward financial institution organizations for actual numbers. The response you get from here is not likely to be a accurate representation of society as a whole.

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A.W.

answers from St. Louis on

What my friend used to do was get a breakdown from the bank of what amount of the loan went twards intrest/principial every month. Then she would pay the regular payment plus the principal amount for next month (and wrote ***.** principal on the check) Then she paid two months of payments every month.

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C.N.

answers from Dallas on

Hello!
Blessings and Happy New Year! We paid off our home earlier and saved money by using advise from Pat Robertson and the 700 Club. They give financial advise on Mondays. We pay twice a month and paid a little more. Instead of pay inf for, example, a lump sum of $700 a month, we cut it in half and paid $360 twice a month. This cuts down the interest a lot and my paying a little more , it enables you to pay off the mortgage faster.
Have a great year!
Sincerely,
C. N.

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A.W.

answers from Springfield on

We decided to get a 15 yr loan this time around, we've done 2 30 yr loans. You pay it off soooo much faster and even if we sell the house in 3-4 years, we're in grad school, the equity we'll get out of it is much greater than if we'd done a 30 year loan, where most of the first 10 years of payment go directly to interest. It is more every month, but it's almost a way of putting money into savings for us. It's interesting to read other people's ways of doing it on here. I'd love to pay extra on it every month as well, but we're living on a student budget at the time! maybe someday!

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R.J.

answers from Springfield on

We did a 30 yr on 3 of out last homes and a 15 on 1 of them, the 15 was great although it was a couple hundred more a month, but worth it. currently we are in a 30yr fixed paying bi-weekly. I'm looking into the simple interest method offered by Primerica, its the only company I can find that offers it, it's not for everyone though. Can't be late, but you can pay your house off really fast.

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T.C.

answers from Dallas on

We made just 1 extra payment our 1st year and the principal was down by 3000 by the end of the year. Since then we haven't been able to make any extras (adopting children) and the principal hasn't reduced by much at all (about 10000 in 6 years).

It reduces the amount of interest that you have to pay and means you'll also get to pay it off sooner. Even if you only pay a little extra towards principal each month, you are going to be doing REALLY well for yourselves.

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A.C.

answers from Detroit on

You got a lot of great responses but one this is important. Read the fine print on your mortgage to make sure that you don't incurr any pre-payment penalties.

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P.B.

answers from Indianapolis on

I know you already have a ton of responses in regards to this but I just wanted to add our situation. We also did a 30 year mortgage on our home but we do not send in payments. Our mortgage company has an equity accelerator program that I immediately signed us up for as soon as we received the information for the mortgage payments. My husband gets paid every 2 weeks, so we set up the auto draft payments to automatically take out half the mortgage payment every 2 weeks (the moment his check is deposited into the bank) PLUS we have them take an extra $75 per month. By doing this, we are paying out about $1350 a month in the house payment, but we are going to have the house paid off in 20 years versus 30 and we will be saving about $65,000+ in interest. I would wager to say most people don't approach mortgage payments this way, but it is one of the smartest things you can do to save yourself some money. I know about struggling every month but in the long run, it will all pan out.

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L.T.

answers from Dallas on

It's also good to pay a little extra but not if that puts you in another type of debt!
My husband (a realtor) said most go with 30 year loans.
Hope this helps!

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A.M.

answers from Dallas on

I wouldn't worry about what most people do. Do what works for you. Your husband is right. Making at least an extra payment a year on a 30yr. fixed is good. It will get your morgage paid off much more quickly. We are in a program with our morgage lender, Wells Fargo, where we pay 1/2 of our morgage payment every 2 weeks. That way we end up paying an extra payment a year because some months there are 3, 1/2 payments.

Of course it will be hard to make any extra payments if you are living on more than you make, have other debt, don't live by a budget, or have a house payment that is much more than a 1/4 of your family's monthly take home pay.

My favorite place for financial advice is Dave Ramsey. You can listen to him weekdays on 570am KLIF from 1-4. www.daveramsey.com is his website. He has some great books and you can even attend his Financial Peace University at a church near you or online. He also has some great recommendations for books by other authors on finances and related.

We are counting every penny too, especially since dh lost his higher paying job and is now bringing home about 20,000 less a year. Ouch! For that reason, I will be going back to work next year as a teacher. I'm sad, because being a stay-at-home mom and a home economist has been the best job of my life. I have also started my own tutoring business, Accelerate Academics( www.acceleratekids.com ) and selling plasma to help make ends meet. HOpefully it will be a limited number of years, depending on the economy. We have been working on getting out of debt and dh job loss and change have put a serious damper on that plan! Luckily, all we have left, other than our morgage, is my student loan.

Good luck.

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J.S.

answers from Tampa on

We are Dave Ramsey listeners, too. We had a 30 year loan and paid extra each month, which I have heard is not usually the norm. However, we are in the process of refinancing our home to a 15 year fixed with a 4.125% interest rate. Our mortgage will go up, but only $133 more than what were paying. It's been fun reading people's responses. Thanks for posting!

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H.A.

answers from Dallas on

We have a 30 year loan - and I do overpay my loan. I also overpay on my auto. On our house I pay about an extra half of a payment every month. Every little bit you can add to principle helps!

Now, as to what the "average" American does? I don't think they do. I think there is a lot of ignorance about how simple interest works, and I think a lot of people have NO clue in the first year of paying $1200 dollar or more a month in payments - you're lucky to reduce your principle balance by 1k. They would be shocked. I've long felt that some basic finance classes need to be in high schools so people will understand credit, auto finance, and mortgages. Like it or not - its part of our daily lives, people should understand it.

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L.L.

answers from Dallas on

All of this assumes a fixed rate loan. Okay--first get an amortization schedule from your mortgage company. On that schedule it will show you how much of each scheduled payment goes to interest and how much goes to principle. Make you regular payment and (to shorten your loan and interest amount) pay a totally separate payment of the amount that says for principle and label the check "principle only". For each principle only payment you make --in the amount that it says goes to principle each month--you will shorten the term of your loan by one month! For example, if you make 2 of these type of payments a year for 6 years -- 12 total -- you have taken a year off your loan term and the corresponding interest that would be paid in that year.

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K.P.

answers from San Francisco on

I had fair amount of similar situation like yours, then in the daily newspaper I saw some ads related about personal asset loans services, we had old car that was quite the price these days, going to them and applying a loan on behalf of assets is good option, you may find this link helpful- http://www.sanfranciscoprovident.com/personal-asset-loans

E.C.

answers from Dallas on

Reba,

We have a 30 yr. fixed mortgage. We only pay the amount due each month, but I would love to pay extra.

There is one catch if you do pay extra. You MUST specify on your check that the extra amount goes to principle. Otherwise, they will probably apply it to the interest. The easiest way to do this is to send a separate check in and make sure they understand that you want it to go the principle. Mark it on the check, send a letter, do whatever you have to do so the mortgage company understands.

It might be worth a call to them to ask them how they prefer to receive that extra money. Maybe they have something set up that would help you.

Good luck, and good job!!

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C.M.

answers from Dallas on

If your mortgage is your lowest interest rate of all your debt, then pay your credit card or car loan balance off first. Your mortgage interest is tax deductible, so you get that benefit as well. As far as loan term, it depends on your age. The last time we refinanced was 4 years ago and was fortunate to get a 5% rate and could afford the payments going with a 15 year mortgage, so I will be 55 when the mortgage is paid off. If you have a 30 year mortgage and this puts you past retirement age or when the kids start college then work with your loan's amortization schedule to figure how much extra you have to pay to pay off the loan earlier. Your mortgage company should be able to provide you a mortgage amortization schedule or you may be able to pull one off their website. If you want an excel file to play with email me privately your personal email and I will send you one. If your funds are tight it may be more beneficial for you to start a college fund with what extra you have or have a house repair savings account. It just all depends on what your family's goals are.

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L.C.

answers from Dallas on

You can save a lot of money in interest by paying a little extra each month, but you can also knock about 10 years off a 30 year loan by just splitting your payments and making half on the 15th and half on the 1st if your payment is due on the first. You do have to get one payment ahead to do this, but then just by knocking half of the months interest out each month you can really cut your years by about 1/3, and if you can afford to make one extra payment each year that also brings it down a lot.
LC

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D.D.

answers from Knoxville on

Yes, we have a 30 and pay extra. Just something Dave Ramsey says that I think is great...The average American is broke...Don't be average. :) Have a great day!

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A.C.

answers from Dallas on

We paid extra every month (to principal, not to interest- make sure you indicate that) and now at 35 years old we own our home free and clear. Now we just save for our taxes each year, and put an amout away each month so we can purchase our next cars free and clear. We are NOT wealthy (my hubby installs T1 lines for a phone company and I am a SAHM), but we decided we didn't like sharing ownership of our home with the bank and just did it. For tips and support you can look up Dave Ramsey.

K.K.

answers from Seattle on

We round up to the next even $100 increment. That way it doesn't hurt but we feel like we're adding a bit each month. Depending on where the escrow account is at, that has anywhere from $25 to $90 more than the actual bill. It takes a little off the end of the mortgage each month and we intend to be here after the house is paid off, so it makes sense to do that.
K.

K. Koitzsch
Owner and Chief Operating Officer
JBF Consignment Sales, LLC
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Address: JBF Consignment Sales, LLC, PO Box 68041, Seattle, WA 98168
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K.F.

answers from Washington DC on

I obviously got this late, but I would like to share - we are just now buying our first home and we are on a 30-year fixed mortgage - we just re-fied to lower the interest rate with the economy changes. We didn't have to sell a first home, so it worked out to our favor - buy low, and hopefully sell high in the future - and we will probably not be here for more than 10 years, but you can never tell....although we do the monthly payments, and maybe we can check into the biweekly payments, looks like for other people it worked...BUT I am considering having a baby and I'm not sure how it would be to be a stay at home mom - do you have to skrimp and save everything?? I love having my own home and I am step-mom, so I have two kids already, but they are in school and I would not want to work if I had a baby....but it's scary!!

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R.H.

answers from Dallas on

Yes most people get a 30 year mortgage. Many do pay extra if you are going to stay in your house a while, it will give you more equity when you do move. If you pay an extra $100 a month it will greatly reduce the term of you loan. Make sure you have money saved up in a savings account for the possible rainy day before doing this. Then start blasting away if you don't have any other debt to pay off. It's a very wise move.

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D.D.

answers from Los Angeles on

We have a 30 yr fixed and pay an extra $100-200 each month. Our goal is get it paid off sooner.

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K.E.

answers from Phoenix on

We used to pay extra every month but now we split the payments in half so it's not one big lump sump and works toward paying off the mortgage faster. This ends up being one extra house payment per year which they said it should bring your mortgage down by 5-8 years.
We will pay extra again when the economy picks up. We were doing both for awhile. We do still have a 30 year loan. I would love to do the 15 year loan, but don't foresee that happening at this time.

Wish you the best.
K.

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B.C.

answers from New York on

Most people do a 30-yr standard fixed rate (don't get an adjustable rate by any means). We did a 20-yr and paid extra and now, after 3 yrs, we're refinancing to a 15-yr and plan on paying extra as well. The savings from having a shorter loan and paying extra each month are tremendous as compared to if you have a standard 30-yr and pay the monthly minimum. If you can afford it, get a shorter loan and pay extra. Also, on refinance, we plan on paying some of the outstanding loan in cash (thus refinancing a smaller amount) since the money is not earning anything right now in investments/CDs.

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S.N.

answers from Dallas on

Hi Reba.

I hope this helps. Check with your mortgage company but most have plans that will allow you to pay your mortgage 2 times a month instead of once. For example, If you pay your mortgage once a month for $900, you will pay $470 every two weeks. I understand that this will do the same as adding an additional payment per year and if you have a 30 year mortgage, it will knock of about 7 years of payment.

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R.A.

answers from Dallas on

My husband and I make 2 payments a month, which will already reduce the morgtage down like 7 years, plus we add an additional $40 each payment, which doesnt sound like much, but that too will knock it off a few years.
I would talk with your mortgage company about that option, it will save you so much and your house will be paid off sooner.
Good Luck!

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T.E.

answers from Dallas on

Reba,

We started with a 30 year mortgage, just because it's all we could afford. As time went by, interest rates lowered and our financial situation changed, we refinanced to a 15 year. This is fairly unusual, at least that's what our lender told us. Now at 40 years old we have only 7 years left and we own our home. This only makes sense if you are looking at the home as an investment. We plan to rent our home and buy again once it's paid off. If you think you will move within 5-10 years I don't think it makes much sense. You can pay an extra payment, or just extra partial payment each month. That will reduce the interest in the long run, but again, only makes sense if you are going to stay in your home for a while.

Hope that helps.
T.

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M.B.

answers from Abilene on

YES, if you can pay extra and apply it to the principle of your mortgage even if it's $20, $50, $100 or whatever you can manage that month. You can pay down your mortgage a lot faster by doing this and yes it will save $. Do check and make sure that your mortgage does not have a penalty for early payoff and if it does, talk with your bank and see if that can be renegoiated. We try to make at least $100 extra payment per month applying to the principle and if we can we make a larger payment.

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J.K.

answers from Austin on

Hi M. M. We have refinanced twice and have gotten a 15 year mortgage with a very low rate. We pay extra each month and hope to pay the house off in four years when I plan to rtetire from teaching. It is nice to have the option of paying only what is owed though. We did that around Christmas , but are back to paying extra again. I am envious that you are debt free except for the house. Lucky you! We have lots of credit card debt as well- trips back east to our parents and friends add up and we don't pay it all off at once. Well, best of luck. J. K. :)

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L.R.

answers from McAllen on

My husband and I just refinanced our home for 15 years. The mortgage is automatically withdrawn from our checking account (saves on stamps). We initially wanted the mortgage option of biweekly but my mortgage company charged a $4 fee for each automatic withdrawel. 26 payments times $4 is $104 too much. So we opted for dividing a full payment by 12 and added that amount to our monthly payment plus we give an extra $25 on top of that to the principal. There is no fee for the monthly withdrawel. Good Luck.

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M.L.

answers from Minneapolis on

I say, "Never mind what other people say",. Do what you need to do. We always tried to pay ahead on our mortgage. If you just look at the amortization schedule, you will know why. If you don't know what that is, then you need to go back to your mortgage broker and ask them to explain it to you. The one and ONLY reason for the amount of bad loans and foreclosures in our country today is that thE CONSUMER DID NOT DO THEIR HOMEWORK, AND DID NOT UNDERSTAND HOW THEIR DOLLARS TRANSLATE FROM INCOME TO SECURITY. Become a wise consumer. It will never hurt you to pay ahead. It is like the best savings account you will ever have, because it will lower your overall interest payments AS MUCH AS YOU PAY EXTRA (AND THEN SOME!) BECAUSE OF THE COMPUtations of the mortgage company. Any time you pay less interest, you are ahead. It saves YOU!!! Enjoy your home and know that youy are money ahead for your future, by this investment.
M

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T.O.

answers from Dallas on

I used to make an extra payment every year on our 30 year. Then when rates dropped we re-fi to a 15 year.

Then with the current economy we re-fi back to a 30 year.... so our payments would be much lower... that way if one of us loses a job we figure we can make it. But we can still pay what we were paying so it's like a 15 year loan. I don't know if that was the right thing or not, but that's what we felt comfortable doing.

And that's what you and your husband need to decide. What you feel comfortable doing. If you can afford it, it will save you tons of money and is very worth it.

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V.

answers from Melbourne on

I have a 30 year fixed. I would never get an adjustable mortgage. Even if I plan to sell in a few years I would stick with fixed rates since you never know what may happen to change plans and keep you in a home for longer than planned. Most people I know get 30 year mortgage for the benefit of lower monthly bills. If you have extra you can add it and have the time and money paid in reduced in the long run, but if things get tuff you can hold off on paying extra. You can also go to paying weekly or by-weekly which pays it down a little faster, or you can add an extra payment or 2 each year which also pays it down a little faster. Some people put any tax refunds into extra mortgage payments to reduce the loan. There's lots of ways you can do it. You just want to make sure your mortgage is accommodative and doesn't charge you for paying extra or paying off early.

M.M.

answers from Dallas on

I think most people do a 15 or 30 year fixed loan. As you know Dave Ramsey recommends putting 20% down and financing for 15 years. We did not put 20% down but took out two loans both at a fixed rate - this way we could avoid paying a PMI (private mortgage insurance). Our bigger loan is at a fixed rate for 30 years and the smaller one for 15 years. We try and pay extra each month with the goal of paying off our 15 year fixed loan within 5-6 years from the date we took it out and our 30 year loan in around 20 years. Good luck!

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L.S.

answers from Tyler on

The main thing to think about it where you will be in 15, 20, or 30 years. You NEED to have your house paid for by the time you retire. You need to think about how many years it is before you reach 62/67ish and plan for your house to be completely paid for by then.

Also, everyone is indicating that they pay extra each month. If you choose to go that route, you need to make sure that you are paying extra towards the PRINCIPAL of your mortgage. If you just "pay extra", the mortgate company could easily put that towards your interest. You need to be clear to indicate it is towards the principal.

I personally pay every two weeks so that I am making an extra payment every year. I currently have my house on the market because I have a lot that I want to build on. When I build, I am planning on getting a 15 year or 20 year mortgage (especially with the interest rates so low right now).

Plus, if your interest rate is currently over 6% and you are planning on staying in your house for longer than 5 years, you should considering refinancing right now. You might be able to get a 15 or 20 year loan and STILL save money on the monthly payment (depending on what your rate is right now).

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D.C.

answers from Dallas on

There are 20 & 25 year options that are available now. If I were advising you I would say stick with a fixed rate loan. Then look at payments. We have a 30 year fixed that we pay extra on each month. It has really brought the principle down. After 6 years we are going to refinance - it will lower our payment $200 and we have decided to stick with the 30 year loan and again just pay extra every month. That way if something unfortunate happens in this economy we are still able to pay rent.

I have some very good loan contacts if you need some number and would like to talk to someone. I actually had one mortgage who advised someone to go elsewhere because the rates and options were much better there. It all depends on your circumstances.

Good luck!

D.D.

answers from Dallas on

First we are on the "Dave Ramsey" debt snowball program. Our Mortgage is not at the top of our list for total payoff, but right now my husband rounds the payment up each month and pays the difference directly to the principal. If you pay the equivalent of one months mortgage directly to the principal over a course of one year you WILL save yourself a bunch of money in interest.

D.
SAHM of three:19,18, and 5. Home Baker and Candy Maker (see Member Perks). Married to the same wonderful man for almost 12 years.

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A.J.

answers from Dallas on

If you make a 13th payment every year and make that payment go strictly to the priciple loan amount then you can pay it off in a lot less time. that way you dont have to make extra each month just send in one extra payment every calendar year but mark that it goes to the principle only.

We have a 30 year fixed loan but we only make the payment each month...

HTH
A. J

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S.M.

answers from Dallas on

Reba, if money is already tight then a 30 year fixed mortgage is probably the way to go. 15 years would be better but only if you can afford it. Yes, making only one extra payment a year will save you lots of money over the term of the mortgage and will allow you to pay off a 30 year mortgage years sooner. I recommend you do some research using resources available on the web to increase your knowledge. Your husband is right on target!

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K.L.

answers from Dallas on

We bought our house in 2004. Like Sara T, we used to pay every two weeks until I lost my job. Our mortgage company set us up on a bi weekly program where 1/2 of our mortgage came out of our checking account every two weeks when we got paid. So two months out of the year, we were making 1.5 payments. This worked out to an extra mortgage payment every year. It cut down lots of interest. Now that we are a one income family, we took ourselves off of the bi weekly plan. We are only making our regular payments now and not saving near as much interest but we got a good headstart the first 4 years. If you can afford to do it, it is definitly worth it!

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E.G.

answers from Dallas on

we did a 30 yr fixed and pay an extra payment or two per year which will allow us to pay off our mortgage in about 15-20 years. We also do not include our taxes - we pay those in a lump sum at the end of the year saves on interest.

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B.N.

answers from Dallas on

Reba,

We just bought our house and we did a 15 year mortgage and I try and pay 200 more a month. Not only will paying even 50.00 more a month save on intrest it will also cut your loan time down...instead of a 30 year loan you could turn it into a 28 or 29 year loan which will definatly save you money.

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M.A.

answers from Los Angeles on

I have been told that weather it is your mortgage or credit cards or even car loans that by paying one more payment it would get you closer to you pay off, I also notice on my statement look at yours that your monthly payment subtract the interest they are asking for and you will see exactley what is going to your credit cards or loan! if you are able to send the interest plus 50.00 to 100.00 more each time. this should not only make your principle loan less but also the interest amount requested.
remember they are chargeing you interest on your unpaid amount, try not to charge once you pay one of your bill off try and use this payment towards an other account.

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L.C.

answers from Dallas on

Hi Reba ~

We bought a new home in 2008. We decided to go with a 30 year mortgage, but we pay enough extra on the payment as if it was a 15 year mortgage. This way, if times are tough or we have an unexpected financial crisis (like my transmission went out a month ago & we wanted to pay cash for it)...we are not absolutely committed to the higher payment.

We have already paid our mortgage down $4000 more in the last 9 months than if we were just making our normal payment amount.

Hope this helps...it works for us!

L. C.

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C.L.

answers from Sioux Falls on

I would recomend talking with your mortgage company directly about it just to make sure that you are actually able to get the most from what you are trying to achieve... You'll want to make sure that your mortgage allows for paying extra against the principal, and also be sure to note it on your payment that the extra goes to principal as most will just apply it to future payments and make it look like you just made part of your future payment early and you will lose the benefit of paying extra by not having it go to the principal. It's an awesome idea and a great way to save a lot of money over time!

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J.D.

answers from Dallas on

We also started with a 30 year fixed rate mortgage in 1993 when we bought our house. We paid extra principal until our 1st child was born. When the interest rates dropped really low about 6 years ago, we refinanced with a lower fixed rate for 15 years, our house payment barely changed in amount from the 30 to 15 year note. Over all, we will have our house paid off by 2017.

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E.S.

answers from Dallas on

We have 30 year fixed mortgages on our houses. We pay extra every single month towards the principal on our rentals because we are receiving more in rent than the mortgage. On the house we live in we pay extra only when we can.

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C.F.

answers from Dallas on

Most people get 30-year loans and if you plan on staying in that same home more than ten years, then it is very wise to pay a little extra each month, even just $100. You can save tens of thousands in interest.

If he can show you an amoritization schedule, it will show you just how much interest you will NOT pay for your house when your home is paid off. And even if you sell before the 30 years, you will have 10X the equity in your home if you consistently pay extra each month for over ten years. We were doing that with this home but now have decided to move, so it's not helping as much as it would have if we'd stayed.

It basically just goes towards interest at first but then if you skip ahead in the schedule, you can see how it starts chiseling away at the principal and that's when you notice that you're owing less and less on your house.

You can pay off a 30-year mortgage almost 10 years early if you pay about $100 more on an average size mortgage. The schedule will show you that instead of paying $250,000 over 30 years for a $150,000 house that you'll pay 198,000 (or whatever the #s are), then you'll see how it's worth it.

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D.L.

answers from Dallas on

My husband and I got a 15 year note and have already been mortgage-free for a couple years. I am a stay at home mom, 37 years old, with three children. It wasn't much more to pay it off in 15 years rather than 30. We don't have a big house and we live a little below our means. We just didn't want to be paying a mortgage in our golden years like our parents. It takes a little bit of doing, but it can be done.

I would encourage you to pay a bit extra each month and see what happens.

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K.F.

answers from Dallas on

I didn't read all the responses so i hope I don't repeat. You DO NOT want to be normal!! Normal is broke. We have a 30 (which I think is probably most common) but are thinking about re-financing to a 15 year if we can get a better interest rate since the interest rates are so good right now. But, really if you just pay extra you can pay it off a lot faster. I wouldn't even mess with switching to paying every two weeks unless they drop the rate because they charge you thousands to do that. Just add extra on to your payment and yes, it can knock years off. And don't let someone tell you that you need that interest for a tax write-off either. If you want more info, check out daveramsey dot com. I don't think you'll be sorry. Good luck!

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S.W.

answers from Dallas on

Look online for mortgage payoff calculators (Microsoft Office templates even has an excel spreadsheet) that will allow you to calculate how quickly you will pay off your mortgage if you pay extra in principal. We pay up to $200 more per month in principal and we'll have our mortgage paid off in less than 20 years that way. If your rate is good, then I wouldn't refinance. But, as other posters mentioned, if you're rate isn't good, you might be able to refinance to a shorter-term note and still pay about the same amount as you're paying now.

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H.B.

answers from Dallas on

Hi Reba!
We have a 30 year mortgage on our house and don't pay any extra. However, my husband works at a bank and told me that the best thing to do is to pay at least one extra payment a year and it cuts your years down a bit! Also, paying the mortgage half in the middle of the month and half at the end of the month is supposed to be a big help on the interest thing! I hope that helps!

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S.T.

answers from Dallas on

We pay ours every two weeks so effectively we have one extra payment a year. We also will send in extra money when we have some. So yes, we pay extra every month on our 30 year mortgage.

I wanted to add that we have no credit card debt and only pay one car loan, the other car we paid cash for.

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J.W.

answers from Dallas on

If you don't have any other debt then paying extra on your mortgage is a good idea. But if you do have debt put that extra money towards it. Your interest on your mortgage is tax deductable so as long as you are not in a higher tax bracket you should not be loosing too much to interest each year, plus interest rates on mortgages tend to be low, unless you are caught in one of those ARM loans that adjusted to above 6-7%. If you are paying more than that look into refinancing, but read the fine print on your current loan as there could be penelties for not keeping your loan with them or getting out early. We pay our minimum each month and have $1000 set aside to pay it if my husband looses his job for two months. You really have to talk to your mortgage company, some have penelties for prepayment, some you can do bi-monthly payments which means the date on which the interest is figured will be less than if you only paid once a month so you save a little that way, some loans like ours if we pay ahead then our next payment date moves so if for instance we went ahead and gave them the $1000 we would be prepaid one month. You really just have to understand how your loan works. -J.

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J.W.

answers from Dallas on

As a mortgage professional and realtor, I usually suggest a 30 year mortgage and then if you can afford to, add extra
money each month to be added to the principal. Your husband is right that you'll save A LOT in interest and pay off your house faster than 30 years. There are many people who are doing this.

If you're looking to buy a home, now is the time! Interest rates are down plus it's a buyers market. Should
you have other questions I'd be happy to talk with you.

J. Wheeler, agent
William Cady Realty Group Inc
###-###-#### direct

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M.H.

answers from Dallas on

We pay every two weeks saving us a TON of money in interest. It also helps us buy down the loan faster and get us that much closer to being debt-free.

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D.R.

answers from Dallas on

Hi Reba,
I make 2 extra payments per year on my mortgage, which reduces the interest and pays my 15 year loan in 11 years! For me, that's a perk!
D.

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L.S.

answers from Dallas on

Hi Reba,
I have a 30 year note which made my monthly payments affordable. Most people I know have 30 year mortgages. In addition to the monthly note, I add a separate check of $100 which is to be applied directly to the principal. I note at the bottom of the check my account number and "Extra Principal." Doing this as a separate check ensures that they do the correct thing with the extra money and not just apply it to the interest! I will be saving nearly five years off my note. If you ask your mortgage company, they will compute it and let you know.

Absolutely, absolutely put extra money toward your principal each month, even if it's only $25.00. By decreasing your principal, you decrease the amount of interest you pay. Actually, the very best way to pay your morgage each month is to make weekly payments that are immediately applied to your principal. It will take YEARS off your mortgage. My mortage company allows weekly payments, but they hold them until the end of the month and then apply them to the princial, which does not help, so I don't do that. It's easier for me to hold onto my money myself. Some companies and banks will allow weekly payments AND apply directly to the principal, but they lose money that way so many won't do it. See what your mortgage company will do for you. My sister pays her mortgage in weekly payments which are not held; they are applied immediately to the mortgage. Their bank does that for them, and they are saving years off their mortgage. I'm so jealous! I just need to take the time to research a company or bank that will allow weekly or biweekly payments that are applied immediately to the principal. They don't like to advertise this because they lose money, but it's YOUR money! Good luck!
Leanne

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B.L.

answers from Dallas on

One way to save money in the long run is to split your monthly payment and pay every 2 weeks. This works well for most people because they get paid every 2 weeks. This also makes it easier to budget. Call your mortgage company and ask about paying this way.

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D.B.

answers from Dallas on

Good Morning Reba S

I work for a title company and most of the closings that have loans are 30 year mortgages. I always suggest in closing that you make extra principal reduction payments. This saves alot of interest. You can payoff your home early and then lease it out and buy another one.

Just a suggestion though.

Have a nice day and oh by the way wish I could stay home,

D. B

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V.T.

answers from Dallas on

I don't know if there is a normal. It depends on how long you want to be in the house. On our first place, we got a 5 year ARM. I know they are scary right now, but if you know how to work them, they can be okay. It was a One bedroom condo, so we knew we weren't going to be there long, so we went with the lower interest. We are currently renting that property, but will sell it next year before the ARM ends and the interest rate goes up. With our current mortgage, we have a 30 year fixed, and my husband and I are choosing to invest our money instead of paying off our house faster. I know we will pay more in interest over the years, but because we are young, we ultimately will make more money through investments, than we would save in paying off our mortgage faster. And when we do pay off our house, the money we have will be liquid not equity based on the value of our home. State Farm does mortgages and investments, so you can talk to an agent about what is best for you and they will talk to you for free. (full disclosure, my husband works for State Farm). I'm sure any financial advisor or bank would talk to you for free to try to get your business. They can help you figure out exactly how much you would be saving in interest by paying extra each month.

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L.C.

answers from Dallas on

Hi Reba!

Happy New Year to you and your family!

Because there are already alot of responses, I do not have time to read through them all to make sure I don't repeat or that I share something not already shared. So, I apologize if I am just a repeater!

I did read the last responder's, Katie's, post though, and I agree 100%. You do not want to be normal because normal is broke! It is a sad fact that on certain issues in our culture, what is the acceptable norm is not always good and is often harmful. So, please be careful as you read the responses of what "normal" is.

The best thing you can do is get a fixed rate mortgage. Do not for anyone reason let anyone convince you that an adjustable rate mortgage is a good thing. I am not going to take up lots of your time explaining all the reasons why they are not good, but let's just say that they are a huge part of why we are in the economic mess we are in now (of course that's because of how people have used them-both the borrower and the lender).

A 30 year fixed is fine if that is what your budget can afford. If your budget can afford a 15 year fixed, then that is even better! Paying a little extra on the principle of the mortgage each month will, in the long run, reduce what you pay overall for the cost of your house. Literally thousands of dollars. You need to be very clear with your mortgage lender when you are paying extra on the principle so it is not accidently applied to your interest. This does not save you any money.

All this to say, if you have a little extra money in your budget to pay towards the priniciple, then great! If not, then as long as you are making your mortgage payment on time each month that is fine as well. Maybe in the future, if there is money in the budget, then you can focus on paying off your house more quickly. It takes away from your current budget, but will save you thousands of dollars in the long run, and in the long run free up a lot more money in your budget (i.e.-you do not have a mortgage payment anymore, so that's extra money in your pocket).

If you see any advertisements to help you pay down your mortgage, DO NOT use them!!! It is 100% unneccessary to pay someone a fee for you to pay extra on the principle of your mortgage. You can do it on your own. It's as simple as walking into your bank, or mortgage holder, and saying "I want to pay extra on the principle of my mortgage this month," write the check, and you are done! Any programs like that are a ripoff to you.

Also, you will hear a common phrase that you get a tax deduction on your mortgage payment so you want to keep that around. People that say that, do not run the hard math numbers. If you and your husband do the math, the chances are good that what you will save in mortgage payments far outweighs what you receive in a tax deduction. This is just an example, but would you want to pay $12,000 a year in mortgage payments to receive a $1,000 deduction on your taxes? See how financially it doesn't make sense? Also, there are plenty of other ways to receive tax deductions! Some people (a very small percentage) plan all their tax deductions around giving their money.

I hope this is helpful to you. My husband is a banker, and he said mortgage rates are at either a 37 or 38 year low so you might want to look into refinancing if it will significantly reduce your monthly payment costs, and if you can recoup the closing costs within 3 or 4 years. If you and your husband plan on moving before that time, then it does not make sense to refinance. The key in refinancing is two fold: 1) to reduce monthly payments in order to free up cash flow for your monthly budget and 2) to recoup the cost of what you pay in closing costs when you refinance.

Sorry this is so long! Sometimes when I want to be helpful, I am a little TOO helpful! :)

God's Grace to you,

Lisa :)

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T.O.

answers from Dallas on

Please call me and I'll tell you what I know about this. Yes by all means you want to pay your mortgage every 2 weeks and that will be the same as making an extra payment each year. Also make a payment each month separately that goes just towards the principle. You can get your house paid of in as little as 7 - 10 years. I know someone who is Paying their home off in 4 years doing this. The mortgage companies and banks don't want you to know about this. Most people don't know this and that's why they don't do it. My name it T. O'Connor 214 - ###-###-####.

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