Paying off Home Loans Early

By | July 12, 2016

canstockphoto12313804Want to know how to make a profit without taking any risks and that is completely safe, legit and secure? How about getting a bigger return than any financial guru can guarantee? Sounds like something out of a dream right? However, if you are still reading this far you are no doubt interested in knowing more. The answer is to pay off your mortgage or home loan with left over cash is a combination that is worth pursuing. It guarantees high returns and is completely safe.

Here’s the formula:

This example is using figures that are interest only just to keep it easy to understand however even people with high interest rates can do this and get a pretty decent return. Remember this example is using figures that are calculated annually.

A traditional mortgage or home loan of $100,000 at 6% pays around $60 annually or around $5 a month for every $1,000 that was borrowed. That approximately $6,000 annually or $500 a month. Now say for example the homeowner repays $1,000. The new amount would be around $5,940 annually or $495 a month. If the homeowner paid more annual and monthly would be reduced.

Now compare the $60 a month which is what the $1,000 may have earned in a bank account at say 3%. It would only gain interest of around $30 in a standard savings account for repaying a mortgage. In addition, income tax would also be paid on a standard account.

The money that you save by putting extra cash on your mortgage is tax free. This saves even more money as opposed to the income tax you would have paid.

After you make a payment it also reduces the interest rate for every year of the mortgage. If the interest rate ever goes up, you save even more money. However, if interest rates fall you still save money. This enables you to have even more spare cash to pay on your mortgage reducing the interest rate even more. There are some bank accounts that let you borrow on money on overpayments. This is like getting your spare cash back again and using it continually while reducing the interest rate with each extra payment you make. The larger the amount of each overpayment the lower the interest rate drops and the earlier you pay off our mortgage or home loan.

As previously mentioned this is just an example of how you can pay off a mortgage or home loan early using spare cash to make overpayments. As shown it’s also a good way to save money as well.

Now if you are a senior of at least 62 years old, another way to pay off any home loans is by using a reverse mortgage. With a reverse mortgage you retain full rights to your house but you can obtain some of its worth in cash to use as you wish. It’s essentially taking out a loan on the value of your house. However, you don’t make any payments as long as you are living in it or sell it.  More information can be found with these Frequently Asked Reverse Mortgage Questions.

You can also find out more about paying off your home loan or mortgage early by searching online for mortgage or home loans specialists who can give you a few tips. One advantage of searching online is that you can compare items such as interest rates and fees of home loans and mortgages between various lenders and banks.