Being in debt is no cakewalk and the sooner you can pay off a few bills the better. Buying a house, holding a mortgage will keep you in debt for up to 30years. You might ask yourself how is it that I pay a bit more than the note each month yet the bill seems to stay the same? The truth is that most of your payment actually goes toward interest and not toward principal. The only way to get out from under a mortgage is to actually decrease the amount of the principal.
One of the most innovative tools online today is the Lump sum mortgage calculator. The calculator will give you the information you need to decide when and how to use the lump sum payment to its best advantage. If you are thinking of using a payment of $20,000.00 it does matter what year of the life of the mortgage it is paid in.
Let's look at a practical example:
You are purchasing a house for $250,000.00, the interest rate is 6.500 and the term is 30 years. You would enter this information into the appropriate boxes on the calculator. Next it would require you to enter the frequency of your payment (monthly for almost all loans of this nature) the amount of the lump sum payment and what year you will make the payment.
Lets pretend that you would sell your stocks on the year 5 to make a lump sum payment of $30,000. How wise it is? How much you would save? Switching to the second tab would give you an answer.
There will be various schedules and graphs to show you the impact the payment will have on your total payment amount over the remainder of the loan. You will be shown exactly how much interest you save as well as how much time you cut from the life of the loan. Conceivably if you make a lump sum payment of this size you can cut as many as 6 years and 9 months off the life of a $250,000.00 loan along with the $127,993.77 savings in interest!
If you can make a payment of substantial size within the first 5-10 years you will be doing yourself a huge favor. Now a lot of lenders may penalize you for this, so before you attempt to make the payment check with your lender to go over any rules they might have concerning early payouts of term loans.
The lump sum mortgage calculator is a great tool and if the penalty does not outweigh your savings this may be the best thing you can do for your family.