Reducing your mortgage payment

How to Reduce Your Michigan Mortgage
One Additional Mortgage Payment a Year

There's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars. The trick is to make one extra mortgage payment a year and apply that payment toward your loan's principal.

This is the method being used by "Bi-Weekly Mortgage Reduction Services or mortgage saving programs". What they are doing is taking your 1/2 your mortgage payment every two weeks holding on to it until you send the other half and then sending it in. You are doing that 26 times a year. So it adds up to one extra mortgage payment a year. For that they charge you a set up fee of $75 - $500. And about $3-7 dollars each time you send money in. It costs you a approx $182 a year to do it. Over the length of the loan it cost you $4500 to do it. If you are disciplined you can do it yourself and save the $4500. Only, when you do it yourself, you don't pay a third party unnecessary set-up costs and fees! If you pay an extra payment at the beginning of the year it is better because it is that much less that interest is accruing on. So you are paying off your Michigan home quicker.


Example: $100,000 loan, 30-year mortgage, 6.5% fixed interest rate
Extra Mtg Pymts/ Year-Principal & Int-Additional Monthly Pmt-SAVINGS-Total Pd-# of yrs
0-$632.07-0-0-$227,542.98-29.92 / 359 mos.
1-$632.07-$52.68-$29,088.02-$198,454.96-24.12 / 290 mos.
2-$632.07-$105.35-$28,399.71-$181,050.85-20.5 / 246 mos.
3-$632.07-$158.02-$58,320.95-$169,222.03-17.92 / 215 mos.
4-$632.07-$210.69-$66,969.79-$160,573.19-15.92 / 191 mos.
5-$632.07-$263.36-$73,607.77-$153,935.21-14.34 / 172 mos.

Look at the savings and the final row. That is how many months you can cut your mortgage down to. Tremendous mortgage savings. What a do it yourself mortgage reduction plan!

One-time Payment
It may not be possible for you to increase your monthly mortgage payment. Keep in mind that most mortgages will permit you to make additional payments to your mortgage principal at anytime. Perhaps, five-years after moving into your home you receive a larger than expected tax return, or an inheritance or a non-taxable cash gift. You could apply this money toward your loan's principal, resulting in significant savings and a shorter loan period. Some banks will allow you to re-amortize your loan. Ask your mortgage person or lender for their rules. Where this comes in to play many times is when a seller still has his old home. When they finally sell the home then they have a large amount of cash to put on the mortgage. They don't want to refinance and be charged closing costs. Ask your bank about re-amortizing your loan.

Example:
With a $100,000, 30-year, 6.5% fixed interest rate mortgage loan, the borrower will pay a total of $227,542.98 to pay back the loan in 30 years. That equals $127,542.98 in interest payments.
If the same borrower makes a one-time $5,000 payment the first day of year 6, he/she will pay a total of $204,710.75 and pay off the loan in 27 years (324 months). That's a savings of $22,832.23 in interest. That is a huge savings for your Michigan home and you.

So the bottom line is: You don't have to pay some company to make an extra payment a year for you. You can do it. Divide your payment by 12. Add that amount to your monthly payment and pay that amount from now one. You will cut years off your mortgage and it did not cost you a dime! For more on Michigan Mortgages go to my website www.RussRavary.com

Should I refinance part 2

So you are thinking about refinancing. If you are in a fixed mortgage and have been in the mortgage for 3 or 4 years it may not make sense to refinance.

You have to work the numbers. Lets say you are going to save $50 a month, it is a no-closing cost loan, and you have been in your other mortgage for 4 years. So what you do is multiply your mortgage savings a month by the number of months left. So 26 years times 12 months a year times $50= $15,600 savings

But you are going to have a $200,000 at 5.75% and now you are back to 30 years. You have 4 extra years of mortgage. So what you do is multiply $200,000 times .0575 times 4 years= 46,000 in interest costs.

So sure you are saving $50 a month but you are adding on 4 years and $46,000 in interest.
That doesn't make sense financially.

If you live in Michigan and want to find out if refinancing is good for you email me at info@russravary.com For more Michigan mortgage articles and mortgage info feel free to go to my website www.russravary.com