Go To The 180th Payment

Category: Finance, Mortgages.

Amortization tables can be intimidating when viewed from a distance, but once they are understood, they can be very useful. They can also help you to plan a strategy to pay off your mortgage ahead of time.

A good amortization table can be helpful in saving you money by informing you which mortgage offer is best for you. Doing so, will free up investment capital so you can make money, a lot of money. Then you ll see how to use this table to pay off your mortgage quickly and then parlay those savings into big- time money. In fact, right now you will learn how to build your amortization table. What to enter into an amortization table calculator. All you need to do is input the total amount of the mortgage, the interest rate and the length of the mortgage. Most amortization tables are simple to construct when you are using a good online amortization table website.

Some amortization calculators ask for the length in years, others ask for it in months, 360 months instead, for instance of 30 years. You will notice each month s payment is broken down into two parts, interest and principal. After you click the calculate button you ll see your amortization table. You ll also notice the interest part of the payment. This is because each of these early payments consists of much more interest than principal. At least in the early part of the mortgage, will be by far, the higher number. It is this dynamic we re going to use to save a lot of money.

This method will work with any mortgage, but for our purposes, we ll use these fictitious numbers. An example in big money saving. We have a mortgage of$ 225, 00The interest rate is 25% , and the length of the mortgage is 30 years. When we look at the second payment we see, $1759 will go toward principal and$ 1, 3531 will go toward interest. When we enter these numbers into our amortization table calculator, we find the monthly payment to be$ 1, 539 When we look at the first payment, we see that out of this$ 1, 5390, $1753 goes toward principal and$ 1, 3530 to interest. If we pay the second payment s principal part, $1759 upfront, or at the same time as the first payment, we will save the$ 1, 3531 in interest.

Because after we make our first payment, we will have a balance remaining on the mortgage of$ 224, 824The difference between how much interest we pay for borrowing this amount of money for 359 months and 358 months is$ 1, 353So, by paying$ 1759 with the first month s payment, we will now be on time to pay this mortgage in full in 358 months instead of 35Yes, this is amazing! Why do we save all this money? Now, if we go on down the line paying the principal amount of the next payment due, ahead of time each month. It does get a little more expensive. We will be saving the corresponding much higher interest charges. As time goes on, the principal payments get higher and the interest gets lower. This would happen because we would have paid three years on time and three years ahead of time.

Still, the 24th payment, after two years, the principal is only$ 2061, and after six years, the 72nd payment the principal is still$ 262 If we stopped paying our principal payments ahead at this time, we will have knocked three years off of the time it would take to pay our mortgage off in full. Payoff a 30- year mortgage in 15 years. Here s the secret. What if we want to pay off the mortgage in 15 years? Go to the 180th payment. Summing it up, you can use this as an approximate formula: On a 30 year mortgage, add to each payment, the amount equal to the principal part of payment number 180 and you will have the mortgage paid in 15 years. Here, you ll see that principal part of the payment is$ 519If we add this amount onto each of our payments from the first payment of our mortgage to the 180th payment of our mortgage, the mortgage would be paid in full in 180 payments, or 15 years. $5193 may seem like a lot to pay upfront, but even if you were to take the principal part of payment number 55, $2400, and add it on to each payment, you would have your mortgage paid more than 10 years sooner.

Or, add to each payment, the amount equal to the principal part of payment number 55 and you will have the mortgage paid in 20 years. Now, let s see how to turn that savings into wealth. While this formula doesn t work perfectly for interest rates over 10% , for interest rates around 7% , it is fairly accurate. Invest the savings. After 10 years you would have$ 318, don, 127Also t forget you would have a house, which would be paid in full. You could, of course become a real estate investor, but for simplicity sakes, let s just say you invested$ 1, 5390 each month in a managed fund that returns 10% yearly. I d say you re pretty close to being rich and it all started with learning how to use your amortization table.

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