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One of the most common ways people lose money is by paying
a 30-year mortgage on their home. A typical 30-year mortgage
at 8% interest inflates the real cost of a $250,000 house
to more than $600,000--more than 2 1/2 times the actual price
of the home.
To avoid paying so much interest, look into the huge financial
difference a 15-year mortgage can make. In the following example,
paying the same mortgage off in 15 years would cost $107,000
less than a 30-year mortgage on the same house.
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Original cost of home:
Interest:
Cost 30-year mortgage:
Cost 15-year mortgage:
Difference:
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$250,000
8%
$600,000
$493,000
$107,000
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How to Pay Your Mortgage More Quickly:
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Don't panic. You do not need to get a new mortgage.
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Decide how much more quickly you want to pay off
and what that is worth in savings. Call your mortgage
holder and ask how much you would need to add to your
payment each month to pay off your mortgage in 15, 18,
or 20 years. Be sure to ask how much you would save
in reduced interest costs. The savings should be significant--often
hundreds of thousands of dollars!
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Decide how to do it. Should you pay in small
extra payments per month or one lump sum at the end
of the year? Paying monthly with smaller payments usually
makes sticking to your plan easier. One strategy to
reduce your 30-day mortgage to 18 years is to make an
extra 10% payment each month and then add an extra month's
payment at the end of the year.
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Extra 10% Per Month
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+
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One Extra Payment Per Year
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Pays off a 30-year mortgage in 18 years
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