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Beginners Real Estate Investing Guide
Real Estate Investing - Ask
Questions Before Making an Investment
First Time Real Estate
Investor
Real Estate Investing - Planning
Your Investment Strategy
How to Find Real Estate
Investment Properties
Getting a Professional Home
Inspection
Large Profits From Inexpensive
Real Estate Repairs
Real Estate Investing - Costs
and Fees
Real Estate Insurance
and Risk Management
Real Estate Investment Risk
Part 1
Real Estate Investment Risk
Part 2
Getting The Best Return For
Your Investment
Creative Financing
For Real Estate Investors
Real Estate Investment Tax
Considerations
Real Estate Rental Properties
- Great Investment or Nightmare
Real Estate Foreclosures - Great
Deal or Headache
Flipping Real Estate for Profits
Slow Return On Real Estate
Investments
Negotiating for the Best Possible Real Estate
Deals
Real Estate - A Time to Buy and a Time
to Sell
Creating Your Real Estate
Investment Strategy
Investing and Growing
Your Real Estate Portfolio
Commercial Real Estate
Investing
Real Estate Marketing
Understanding Real Estate Law
Do You Need An Real Estate Agent?
What The Real Estate Mortgage
Lender Sees
Do You Have A Career In Real
Estate?
Rural or Urban Real Estate
Investments?
Real Estate Investing on the
Internet
Real Estate Investing
- Property or Paper? |
Real Estate Investing - Introduction
Paying Your Mortgage
Getting a loan is easy. Paying it back is the hard part. This is even true
for mortgages. Here's the best tip that you will ever receive concerning
mortgages. Each month, make sure that you pay more than the regular mortgage
payment, and that those extra funds are applied to the principle, not the
interest.
Not only does this reduce the principle of the loan more quickly, it also
reduces the amount of interest you will pay over time. Take a look at this:
You get a mortgage loan for $100,000 for 30 years. Your payments are $500
per month, for 360 months. In 30 years, you will have paid $180,000. So,
on a $100,000 home, you paid $80,000 in interest - more than half of the
original loan amount!
However, if you could pay an extra $200 each month, or even an extra $100
each month, you will reduce the amount of interest you pay by more than half
- and you will pay off the home in about 15 to 20 years, instead of 30.
The only problem that there is with doing this is that it does not account
for the value of money. Thirty years ago, the dollar was worth more than
it is today. Fifteen years ago, it will be worth less than it is worth today.
When you make that last $500 payment, in 20 years, it would only be worth
about $250 if it were viewed as money from today.
What does this mean to you? It means that ten dollars today is worth a great
deal more to you than that same $10 will be worth in five or ten years. How
does this play into making additional mortgage payments? Well, you must figure
up the present value of your mortgage.
The value of a 30 year mortgage at $500 per month, with a 5% interest rate
is exactly the same as a 20 year mortgage with a $500 per month payment,
with a 5% interest rate. Think of the extra payments that you are making
as an investment - because you are actually investing in the equity of your
home, and you are saving money by paying less interest.
Even banks and mortgage companies recommend that you make extra payments
to pay off your loan early. Since their money comes from the interest you
pay, it's odd that they would suggest that you do this.
They do this, however, because they want to be known as the financial institution
that helped you to save money. But they also do it because they understand
the reduction in value of money over time. They know that the money that
you pay today is worth more than the money that you will pay in ten or fifteen
years.
Furthermore, when you repay faster, their risk in loaning you the money is
reduced - with each payment that you make - and they are able to take those
dollars that you pay in today, and loan them right back out to someone else.
But you really aren't interested in how they benefit. Concentrate on how
you benefit. You build more equity in your home, in a shorter period of time.
You end up paying a great deal less interest over time. You also have the
security of owning your home, free and clear, faster.
• More
Articles
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Beginners Real Estate Investing Articles
How to Advertise a Rental
Property
How to Build Equity
in any Real Estate Market
How to Find Motivated
Sellers
Developing a Profitable Real
Estate Investing Strategy
Bird Dogging: Getting Started in
Real Estate Investing
Buying Your First Home
Using Lease Options to Purchase Real
Estate
Real Estate Foreclosures
Increase Your Net Worth Through
Real Estate Investing
Interest Only Mortgages
Real Estate Investing
No Money Down Real Estate
Investing
The Power of the Lease Option
Real Estate Investing Tips
Real Estate Investments
Refinancing Your Mortgage
Loan
Paying Your Mortgage
Selling Your House without a
Realtor
"Subject To" Real Estate
Financing
Using Trusts as a Real Estate
Alternative
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