Can Paying Off Your Mortgage Loan Early Save You Thousands Of Dollars?

As the mortgage rates continue to rise in Texas, paying off your mortgage early can save thousands of dollars. How often one makes mortgage payments can make a sea of difference whatever the mortgage rate reports

Experts warn that mortgage interest rates could surge by a whole percentage point this year. WFAA’s Jason Wheeler, in a recent Right on the Money report, also talked about how mortgage rates are going to increase significantly. Unfortunately, the apprehensions proved accurate, and right after the report’s release, rates jumped about one-quarter of the way to making that prediction come true. The average 30-year fixed-rate climbed from 3.22% to 3.45%.

mortgage loan
mortgage loan

Small increase in interest rates of mortgage loan leads to a significant rise in interest paid

Even the smallest increase in interest rates leads to a significant rise in interest paid for the mortgage. The present mortgage rates have been highest since March 2020, right after the pandemic hit.

The above point can be understood better with the following example. If a US citizen financed an average priced Dallas-Fort Worth home costing $355,000 (with 20% down and a 3.45% rate instead of a 3.22% rate), he would have to shell out an extra $36 per month. The principal and interest payment would go from $1,231 to $1,267 per month. If the repayment period is 30 years, this translates to an additional $12,960 in interest.

Therefore experts warn to keep a sharp eye on interest rates if anyone plans to buy a home this year.

Can you pay off your mortgage loan earlier, for less?

With interest rates surging, you have one option which can save you a lot of money. It is the rate at which you pay your mortgage. Usually, lenders offer mortgage repayments monthly, 12 installments per year.

If a person makes a mortgage payment of $2000 per month, he would typically pay an amount of $24,000 annually. Of the rate of monthly installments is increased to 26, the annual payments come out to be $26,000. Adding the numbers for our home worth $355,000 (with 20% down and an interest rate of 3, 45%), we see a big difference. Having a 26-month annual installment means you would pay off your 30-year mortgage 43 months sooner and you’d pay $23,237 less in interest.

However, check with your lender and ensure they don’t charge extra fees for a 26 installment annual payment plan.

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