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Biweekly ! Bi-weekly Mortgage Information
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America's Mortgage Debt
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One classic American dream is owning your own home. Since most of us are unable
to pay cash for that dream, we borrow the funds and put ourselves in debt for a
good portion of our lives. That debt is repaid based on the standards set by
the lending institutions.
For most of us, that means repaying three to four times what we borrowed over
thirty years as shown below:
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Amount of Mortgage: $150,000
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Interest Rate: 8.0%
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Repayment Term: 30 Years
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Monthly Payment: $1,500.00 (including $399.34 escrow)
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This homeowner will repay a total of $396,218.02 !!
Additionally, the owner's equity accrued over the years moves at a snail's
pace. The loan is structured to pay mostly interest over the first 23 years.
Consider this:
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After 5 years and over $66,000 in payments against this loan, this homeowner
will still owe more than $142,000. That's less than $8,000 in equity.
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After 15 years and over $198,000 in payments, this homeowner will still owe
more than $131,000 That's less than $19,000 in equity.
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At year 23, only half the original loan will be repaid, leaving more than
$92,000 in payments to be made.
This dream is actually a financial nightmare! But there is a better way. You can
make additional payments against the principal portion of the loan which
reduces the balance, the interest paid, and the remaining term.
It's that simple. Yet 97% of American homeowners do not pre-pay their
mortgages. Why not? It takes self discipline and consistency. Only 3% of
Americans pre-pay their mortgages, and only 1% do so consistently.
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