Articles & News About Mortgage Loans

House Mortgage: Are You Only Paying Interests?

Knowing exactly how much you should pay each month will tell you if you can afford the loan or not. However, knowing the total amount of what you need to pay for the course of your loan might totally surprise you. This is because the computation of the interest rate is different from what you might think. For example, you are borrowing $100,000 at 6% interest rate for a 30-year fixed-rate mortgage. As an unsuspecting borrower, you may think that you will pay $100,000 plus the 6% interest, which is just $6,000. But the fact is, you will pay more than $115,000 on interest alone! That is more that what you borrowed! How does it happen?

The reason for this is that interest rate is taken not from the total loan but from remaining unpaid balance. To get the total monthly fee, first, we take the 6% of the total loan, $6,000. We divide it by 12 for the months in one year. So, $6,000 divided by 12 is $500. That?s how much interest you pay for the 1st month of the mortgage payment. Your total monthly payment is $600 a month: $500 goes to the interest while only $100 goes to the principal. That means about 17% of your payment goes to your principal while the rest is paid for the interest. Since you pay $100 for the principal, the next month, your debt is at $99,900. You multiply $99,900 with 6% and divide the product by 12 to get the interest you have to pay, which is $499.50. So for your next payment of $600; only $100.50 will go for the principal while the rest goes as payment for the interest. This means, after paying $1200 for 2 months, you have only paid $200.50 for your mortgage. The case is much worse if the interest rate is set higher.

Moreover, if you think you have owned 50% of your house after 15 years, it is better to think other things instead. Because believe it or not, 15 years of paying your mortgage will only give you 29% ownership to your house. If you, however take a loan at 9%, 15 years of payment will only give you 25% ownership. Needless to say, you have a long way to go. To be able to own at least half of your house, you need to complete 21 years of monthly mortgage payment (22 years for a 9% interest rate).

The only thing that is good about this loan is that more and more of your payments go to the principal (less and less go to the interest) as time goes on.

The question now is, can you do something about it?

There are 2 ways to get a better deal: one is to pay cash and two is to get a shorter loan. The former is a mere impossibility; the latter is something that can be seriously considered. This is because a loan taken at a shorter term has a higher monthly payment which quickly shrinks down your debt. The total interest you will pay also shrinks from $115,000 down to a little over $51,000. For example, a $100,000 loan at 6% interest rate for a 15-year fixed-rate mortgage has a monthly payment of $841. This increase in monthly payment pays the principal down faster, thus, the amount you pay for the interest is lower. In other words, shorter term loan may have higher monthly mortgage payment but charges lower interest overall. But can you afford the 15 years loan instead of 30 years?

There is another possible way reduce the amount of interest you pay for your mortgage: prepayments. Having fixed monthly mortgage payments does not mean you have to pay is up to the decimal point all the time. You can lower the interest by paying more on the principal each month- that is if you have extra money to spare.

Why prepay?

Prepayment is a good investment since you speed up the term of your loan, at the same time, creating significant savings from the interest. Your money may be locked up to your equity which is not easy to access but prepaying provides you with a long term savings.

For more information on mortgage and home financing please go to: http://www.homefinancingalert.com/Financing-Home-NC.html http://www.homefinancingalert.com http://www.drnathaliefiset.com

Other Article Sites

findabook.com moneycd.info a-mortgage.info about-lemon-laws.info aboutstudentloans.info
all-about-publishing.info auctions-articles.info bestcollege-university.com bestispconnection.com
biblefolder.com blogger-website.com books-used.info brokers-guide.info buywindows.info cable-dsl.info
career-miner.com carpel-tunnel.info cashinaflash.info cashloanreviews.info casinobell.com chat-house.info
clearmycredit.info collegeloantips.info crones.info depression-articles.info dirnic.net dishguides.info
divers-below.com expodog.info financewizz.com fire-insurance.info getgood.info handleit.net it-idea.info
health-supplies.info hosting-right.com insidealert.com insurance-facts.info jobs-employment.info
justgood.info lookgold.net lowcost-travel.info money-source.info myhostzone.info numisblog.com
peoplesearchfinder.info pr-articles.info realeas.com refinancing-guides.info spyware-remove.info
telelot.info the-law.info toppaid.info travel-deals.info travelcorrect.com wedding-guide-site.com
your-blog.info your-credit.info

MORE ARTICLES:

5 Things You Should Ask Your Mortgage Broker
There are a couple significant reasons behind the current crisis in our mortgage market One is that mortgage brokers haven't been giving borrowers enough information to make an informed decision

Local Mortgage Company Beats Odds, Grows Despite Meltdown
With most firms cutting back and closing doors, local firm continues to ramp up.

Mortgage Payment Protection Relieves Financial Burdens
Many Brits are paying extraordinary premiums for insurance protection that they do not even know they have Some know they have the protection but are not aware that there are less expensive options that provide better benefits and better services

What is a Buy To Let Mortgage?
A buy to let mortgage is a mortgage on a property which is to be let out or rented, rather than occupied by the owner. A buy to let mortgage is exactly as it sounds - a mortgage that allows you to buy a property in order to let if out to a tenant.

Mortgage Marketing Maverick and Industry Veteran Launches High-Impact, Low Cost Mortgage Broker Marketing Website
Realizing that most of today's mortgage professionals are struggling to generate new business, MortgageMarketingUniversity.com comes to the rescue by providing proven mortgage broker marketing and business development techniques, strategies and tools to the loan originator and mortgage broker at an unbelievably low monthly cost.

Understanding Debt Consolidation Loan And Mortgage Refinance Options
Perhaps the one thing that many, many people have in common today is a problem with finances. In fact, many men and women have found themselves struggling with ever mounting and growing debt. They find themselves wondering if they will ever be able to get their financial houses in order. By way of this informational article, you are provided with information about what you can do to bring a sense of control over your finances. In this article, you will be provided information to help you understand what options you?ve available to you when it comes to the matter of debt consolidation loan and mortgage refinance options.

Royal Consultants Offers Low Rates for New York Mortgage Holders, as well as Connecticut and Massachusetts
Royal Consultants offers new hope in mortgage refinancing.

An Easy Way to Save Money on Your Mortgage  Pret Hypothecaire
Do you know that you can save tens of thousands of dollars on your home loan by paying the very same amount on it every month? Not many people realize how effortless this can be.

Advantages Of Refinancing Your FHA Home Mortgage Loan
When interest rates fall, it is a good time refinance your house. You can even refinance if you want to do some debt consolidation. Taking advantage of the programs offered by the government, in the form of FHA home mortgage loan refinances, can be a great way to have a streamlined process, and to save some money. And if you already have an FHA loan, it is easier than ever for you to refinance it.

Everything You Need To Know About Mortgage Regulation
Until midnight of Saturday 30th October 2004 the regulation of mortgage sales was done so on a voluntary basis which was overseen by the Mortgage Code Compliance Board (MCCB) - Lenders and brokers alike had pledged to adhere to this code which has now closed down.

No Doc Commercial Loans Now Available from Katz Mortgage Team
Katz Mortgage Team, http://www.katzmortgageteam.net/commercialloans.shtml, backed by Amtrust Mortgage is pleased to announce they are now offering No Doc Commercial Loans. Now without the red tape and high cost of a commercial bank, those interested in obtaining a mortgage for light commercial property can get a great deal on a variety of commercial loans at great rates and with the same people many have trusted for residential mortgages for over 15 years.

Loan Application Mortgage Rate Calculator for your Mortgage Loan
Are you thinking of purchasing land, a piece of property, or your dream house? Then maybe you have considered applying for a mortgage loan. If you have already decided that you are getting a mortgage loan, then let a loan application mortgage rate calculator help you.

Mortgage Leads, Buying Them Fresh
Mortgage leads can be bought in many different varieties. And depending on which loan officer you ask, some mortgage leads are better than others.

How To Perform An Offset Mortgage Comparison
An offset mortgage comparison is not as straightforward as it would first seem. This article will give an overview of an offset mortgage and discuss how to compare offset mortgages to help you find the right one.

Expert Warns Consumers: Beware of Inaccurate and Misleading Reverse Mortgage Articles
Valerie VanBooven RN, BSN, PGCM, long-term care and reverse mortgage expert warns that many recent articles, such as those posted on Bankrate.com and in the Wall Street Journal contain misleading information, and leave out important facts about this federally regulated program. According to VanBooven, the so-called "experts" who are interviewed for quotes often have no involvement in the mortgage industry and do not understand the federal law that regulates these loans.