How
To Pay Off a 30-Year Mortgage in 15 Years
Without Really Feeling It
Want
to own your home by the middle of the next decade,
but can't handle the monthly payments on a 15-year
mortgage right now? Try applying the "3%
Rule" to your 30-year mortgage.
Here's
how it works: You pay your regular monthly payments
for the first year of the loan. At the beginning of
the second year, you take an amount equal to 3% of
the monthly principal and interest portion of your
bill (it's itemized on your statement), and include
it as additional principal with each payment for
that year. Repeat the procedure for each subsequent
year, and in about 15 years you own your home.
As
an example, consider a $100,000, 30-year loan at
9-1/2%:
|
| |
Monthly
Interest/
Principal |
3%
Additional
Payment |
Total
Monthly
Payments |
| 1st Year: |
$ 840.85 |
--- |
$ 840.85 |
| 2nd Year: |
$ 840.85 |
$ 25.23 |
$ 866.08 |
| 3rd Year: |
$ 866.08 |
$ 25.98 |
$ 892.06 |
And
so on. In effect, you're giving your lender an
"annual raise" of 3% -- almost certainly
less than the cost of living. And the reward is full
ownership of your home in about half the time called
for by the terms of your mortgage! |
|
