Loans and mortgages – A little prepayment goes a long way

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Make an extra monthly payment on your mortgage every year, and you’ll save thousands of dollars in interest. Just add a little to you check each month. Over the course of the year, it will add up to an entire extra payment.

For example, suppose you have 25 years left on a fixed-rate 30-year mortgage of $200,000 at 7-percent interest. If you add just $150 to your $1,300 monthly payment, you’ll finish paying your mortgage more than five years early. Plus, you’ll save almost $55,000 in interest over the course of the loan.

To find out how much you can save, visit www.myfico.com, and click on Credit Education. In the Calculators section, the Mortgage Payoff Calculator will figure exactly how much time and money you’ll save by prepaying.



All the best,



Timben

Loans and mortgages – Get a free discount

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You can get an easy discount by having your loan payments automatically deducted from your checking or savings account. Most lenders will lower your APR by 0.25 percent or 0.50 percent just for making automatic payments.

Lenders like automatic deductions because it gives them less paperwork to do. At the same time, it’s good for borrowers in a couple of ways. Not only do you get the lower APR, you don’t have to worry about whether your check will arrive on time. And it’s one less check you have to write.



All the best,



Timben

Loans and mortgages – Pay off loan in half the time

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Save tens of thousands of dollars by choosing a 15-year mortgage instead of a 30-year term. Your monthly payment will be higher, but cutting the time of the loan in half cuts off years of interest charges. Plus, interest rates are lower most of the time for loans with shorter terms.

Say your annual percentage rate is 7 percent, and you choose a 15-year fixed-rate mortgage over a 30-year mortgage. For every $100,000 you borrow from the bank, you’ll save $75,000 in interest.

It may be tempting to stretch your loan out over 30 years. After all, who doesn’t want to keep their monthly mortgage payment to a minimum? Sometimes, though, you have to spend money to save money.



All the best,



Timben

Loans and mortgages – Buy your home with a HELOC

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You can use a home equity line of credit (HELOC) to actually buy a home. A HELOC is an adjustable-rate loan that works as a credit line rather than a mortgage. Usually, you get a HELOC with the equity you build up on a home. Now you can make a down payment on your home and use a HELOC to pay for the rest.

The interest rates for HELOCs are around 4 percent, which can save you a lot of money in interest charges. Since the rate is variable, it can go up or down. But it’s still better than the traditional 30-year fixed-rate mortgage with rates closer to 6, 7, or 8 percent. With a HELOC you can borrow extra cash without having to take out another loan, and all the interest you pay is tax deductible.

HELOCs usually have much shorter terms than traditional loans. Rather than being stretched out over 30 years, a HELOC will have a term of 10 or 20 years. You may want to consider a HELOC if you plan to pay off your home in a short time.

If you like having stable monthly payments, though, you should try something different. The rates for HELOCs change with the market, so the payments will, too.



All the best,



Timben

Loans and mortgages – Compare online for best price

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You already know you can save money by shopping around for the best mortgage rates. Now you just have to make sense of all the numbers you found. Put those figures into an online calculator to organize your information. You can find calculator programs at Web sites especially designed to help you compare loans.

LendingTree.com is a great place to start. You can submit an application and get rates from four competing lenders. Then compare the rates by plugging them into one of its financial calculators. For example, one will tell you if a 15-year loan or a 30-year loan would save you more money based on the mortgage amount and interest rates.

Interest.com has calculators that tell you what your monthly payments will be from the interest rate, the term, and the loan amount. You can also find out how much you can afford to borrow, how much you’d save by making additional mortgage payments, and how much you can deduct on your taxes.

FindLowerMortgageRates.com also has useful programs like a calculator that tells you how much money you should put down on your new home.

Other good Web sites to try are:

* www.compareinterestrates.com
* www.bankrate.com
* www.loanweb.com



All the best,



Timben