If you have a mortgage for $150,000 at 6% interest and it takes you 30 years to pay off, you will pay a total of $173,757 in interest. If you instead pay off that same mortgage in 5 years, you will pay a total of $23,995 in interest. By paying off the mortgage early, you will save $149,762 in interest!!! Even if you pay it off in 15 years, you will still save $95,916 in interest! WOW!
When you purchase a house, it should be a GOOD thing. If you overextend your ability to pay off early, it could become much less than a good thing.
Home Purchasing Tips
- Pay at least 20% down to avoid Private Mortgage Insurance (PMI)
- Ensure that the monthly payment does not exceed 25% of your take-home pay
- Check out the costs of owning the home – property taxes, homeowners association fees, maintenance fees, average utility payments, homeowner’s insurance, etc.
- Do not buy if you do not understand the area. It is important to learn about the area in which you are purchasing before you make an offer.
- ALWAYS have a professional complete a home inspection. It will cost around $300, but it is well worth it.
- If you have to have a mortgage, make sure it is a fixed rate mortgage with a term less than 15 years (to save all that interest!).