One should never take a mortgage loan at face value. When you sign
your mortgage loan papers, you will know the interest rate you will
be paying for every month after that for the duration of the mortgage
loan. But interest rates of mortgage loans arenít always as good as
they look. Very few people know that most of their monthly payments
actually go to their mortgage loan interest.
When you take a 30-year mortgage loan for $100,000, the actual amount
you pay for is $300,000. $100,000 is used to pay for the principal
mortgage loan balance. But the remaining $200,000, which part of your
mortgage loan did it go to? Thatís right. Interest. Majority of your
mortgage loan payments actually go to interest and to the pockets
of your lenders.
Now, hereís another thing to think about when acquiring a mortgage
loan. Moving is a common trend in America. The average person in America
moves every 7 or so years. Moving into a new house usually means acquiring
a new mortgage loan to cover the costs of the new house. Itís a never-ending
cycle. And with interest payments at 91% of your monthly mortgage
loan payment, it is also a vicious cycle.
Think getting a 30-year fixed rate mortgage loan at $100,000. Interest
rate for this mortgage loan is 7%. When you move after 5 years, you
still have a mortgage loan balance of $94,000, 94% of the original
In five years, you paid several thousands of dollars for your mortgage
loan but only ended up paying only $6,000 of your mortgage loan because
the rest went to interest. 86% of your mortgage loan is what you would
still owe even after ten years or 120 repayments. To reach 50%, you
need about 20-25 years of mortgage loan payments. Thatís how long
a mortgage loan takes to get paid off.
"Money, it turned out, was exactly like sex, you thought of nothing else if you didn't have it and thought of other things if you did.Ē
- James Baldwin
And if you think that a mortgage loan will help you with your taxes,
think again. Mortgage loans takes about a dollar of interest from
you while you only get back about 28 cents from tax deductions.
Instead of prepaying their mortgage loans, some people use the money
to jump start another investment. But the thing with investments is
that there is no sure-fire way to adopt in order to succeed. You could
get lucky or you could lose a lot. Itís a far riskier business to
invest your money on the stock market than paying off your mortgage
Now donít let this picture about mortgage loans depress you and make
you stay away from them for the rest of your life. The truth of the
matter is, mortgage loans are a way of life. So how do we go past
the mortgage loan hurdles? Pay off your mortgage loans early by paying
extra. By paying extra once a year, you can actually remove 8 years
from a 30-year mortgage loan.
Perhaps the best way for you to get ahead on your monthly mortgage
loan payment is through a bi-weekly mortgage loan. With a bi-weekly
mortgage loan, your payment is done every two weeks for half your
monthly amount. At the end of the year, youíll notice that you have
made 13 monthly payments instead of 12.
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