Shorter-term loans often include lower interest rates. The total savings in interest will come out to $25,908.20 over the lifetime of the loan.īorrowers can refinance to a shorter or longer term. If this borrower can refinance to a new 20-year loan with the same principal at a 4% interest rate, the monthly payment will drop $107.95 from $1,319.91 to $1,211.96 per month. For example, a borrower holds a mortgage at a 5% interest rate with $200,000 and 20 years remaining. Refinance to a shorter termĪnother option involves refinancing, or taking out a new mortgage to pay off an old loan. In such cases, borrowers can allocate a certain amount from each paycheck for the mortgage repayment. The biweekly payments option is suitable for those that receive a paycheck every two weeks. Thus, borrowers make the equivalent of 13 full monthly payments at year's end, or one extra month of payments every year. With 52 weeks in a year, this approach results in 26 half payments. This entails paying half of the regular mortgage payment every two weeks. Biweekly PaymentsĪnother strategy for paying off the mortgage earlier involves biweekly payments. For the same $200,000, 30-year, 5% interest loan, extra monthly payments of $6 will pay off the loan four payments earlier, saving $2,796 in interest. For example, a one-time additional payment of $1,000 towards a $200,000, 30-year loan at 5% interest can pay off the loan four months earlier, saving $3,420 in interest. Borrowers can make these payments on a one-time basis or over a specified period, such as monthly or annually.Įxtra payments can possibly lower overall interest costs dramatically. Outlined below are a few strategies that can be employed to pay off the mortgage early.: Extra PaymentsĮxtra payments are additional payments in addition to the scheduled mortgage payments. Once the user inputs the required information, the Mortgage Payoff Calculator will calculate the pertinent data.Īside from selling the home to pay off the mortgage, some borrowers may want to pay off their mortgage earlier to save on interest. The Mortgage Payoff Calculator and the accompanying Amortization Table illustrate this precisely. Thus, with each successive payment, the portion allocated to interest falls while the amount of principal paid rises. ![]() However, as the outstanding principal declines, interest costs will subsequently fall. Since the outstanding balance on the total principal requires higher interest charges, a more significant part of the payment will go toward interest at first. A typical amortization schedule of a mortgage loan will contain both interest and principal.Įach payment will cover the interest first, with the remaining portion allocated to the principal. This interest charge is typically a percentage of the outstanding principal. The principal is the amount borrowed, while the interest is the lender's charge to borrow the money. Principal and Interest of a MortgageĪ typical loan repayment consists of two parts, the principal and the interest. It calculates the remaining time to pay off, the difference in payoff time, and interest savings for different payoff options. The Mortgage Payoff Calculator above helps evaluate the different mortgage payoff options, including making one-time or periodic extra payments, biweekly repayments, or paying off the mortgage in full. Additionally, FHA loans require an upfront mortgage insurance premium to be paid as part of closing costs as well as an annual mortgage insurance premium included in your monthly mortgage payment - both of which may impact your affordability.Related Mortgage Calculator | Refinance Calculator | Loan Calculator Keep in mind that generally, the lower your credit score, the higher your interest rate will be, which may impact how much house you can afford.įHA loans are restricted to a maximum loan size depending on the location of the property. If your credit score is between 500-579, you may still qualify for an FHA loan with a 10% down payment. The lowest down payment is 3.5% for credit scores that are 580 or higher. If you make $3,000 a month ($36,000 a year), your DTI with an FHA loan should be no more than $1,290 ($3,000 x 0.43) - which means you can afford a house with a monthly payment that is no more than $900 ($3,000 x 0.31).įHA loans typically allow for a lower down payment and credit score if certain requirements are met. However, these limits can be higher under certain circumstances. This means your monthly payments should be no more than 31% of your pre-tax income, and your monthly debts should be less than 43% of your pre-tax income. ![]() With a FHA loan, your debt-to-income (DTI) limits are typically based on a 31/43 rule of affordability.
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