One of the greatest benefits of owning real estate is known as the “debt pay down.” Every time you make a mortgage payment, a portion of your payment goes towards the principal of the loan and reduces the total balance that you owe. When you rent, 100% of your rent payment goes to your landlord. Paying off a mortgage is a great feeling and is generally good financial advice for most people. If you currently have a 30 year mortgage on your home, you may want to consider putting together a payment plan to pay off your loan early.
“The 15 year fixed-rate home mortgage is far and away the best option for consumers because of the low interest rate. All other things the same, including originations fees, the 15-year rate in today’s market is 0.75% below the 30-year rate….
…The drawback of the 15, of course, is the higher monthly payment. In the case at hand, the payment on the 15 would be $1600 compared to $1046 on the 30. What has surprised me is the number of borrower who can afford the payment on the 15, but nonetheless choose the 30 because it gives them greater freedom to spend on other things. They are present-oriented rather than future oriented, and the only thing I have to say to them is ‘lots of luck — you will need it…’
…A borrower unable to meet the payment required on a 15 who anticipates an increasing ability to pay in the future can develop an extra payment game plan for paying off early – possibly in 15 years. Every such plan must be hand tailored to the individual needs of the borrower. I will illustrate with two examples…”
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