People know of us as a leading mortgage broker company, so it may come as a surprise to be reading about how MortgageDepot helps borrowers to payoff their mortgages early and reap substantial benefits. Making extra payments toward the principal balance of a mortgage not only reduces the interest homeowners pay, but it also increases their equity in the home, which could have the added benefit of early elimination of monthly private mortgage insurance premiums. We’ve made it easy by creating a calculator borrowers may use to see the effect of extra payments on a mortgage loan.
Benefits of making extra payments
We’ll get to the methods our borrowers can use to make extra payments toward their mortgage, but regardless of how a homeowner chooses to do it, the benefits include:
- Reducing the length of time a homeowner has a mortgage on the property. The extra payments reduce the principal balance of a loan making it possible to be free of mortgage payments much faster than the loan’s original 30- or 15-year term.
- Reducing the amount of interest paid over the life of the loan. The interest a borrower pays each month is based upon the principal balance at the time of the payment. Extra payments toward principal result in a lower principal balance on which to pay interest.
- Eliminate monthly premiums for private mortgage insurance. Reducing the principal balance of a mortgage through extra payments increases the equity a homeowner has in the property. A reduction in the loan-to-value ratio permits a homeowner to request elimination of private mortgage insurance.
Extra mortgage payments will not change the amount of a person’s monthly mortgage payment, but the benefits that a person can realize make it worthwhile.
Using a mortgage-payoff calculator
Our mortgage-payoff calculator is easy to use and only requires that a borrower or homeowner have the following information to enter into it:
- Date of the first mortgage payment that was due on the loan.
- Original loan amount or the current principal balance if the borrower has already made extra payments toward principal.
- The original term of the mortgage expressed as the number of years until it would be paid in full.
- Annual interest rate expressed as a percentage.
- The amount of the extra payment a homeowner or borrower wishes to make and the frequency of the payment.
Users of the mortgage-payoff calculator have an unlimited number of options for the amount and frequency of extra payments. Some people prefer to pay the same amount each month. Others might prefer a one-time payment or a lump-sum payment at a predetermined time each year. For example, a homeowner might wish to make a single payment toward principal and schedule it for about the time the person expects to receive an income tax refund.
Borrowers who have used the mortgage-payoff calculator to see how their loans could be affected by making extra payments have been shocked by the results. For example, if one of our borrowers purchases a home with a $400,000 mortgage payable over 30 years, paying an extra $500 a month will save $70,305 in interest over the life of the loan and shorten the payoff time by seven years and seven months.
MortgageDepot can help
Homeowners with existing mortgages or buyers in search of a new home will benefit from the expertise and mortgage industry experience of our loan officers. We’ve built our reputation as a leading mortgage broker through the knowledge and information we make available to all MortgageDepot customers.
Learn more about making extra payments toward a mortgage by visiting us at MortgageDepot.com.