For years, banks and financial advisors recommend that you have more money in your mortgage paid to reduce the amount of enormous interest and the period for which the loan.
For example, if you have some 200,000 more than 30 years at a rate of 5 borrow, your monthly about 1074.more than 30 years, you really pay 1074 x 360 (months), which is of 386 640.
This is the 186 640 interest!
If you have an additional $245 a month and pay 1320 per month in mortgage could find you 10 years of the repayment period that the loan would be fully paid in only 20 years coupe.En addition, your total payments 316 664, save 69 756!
Error in this technique is that it ignores the time value of money.
Everyone knows that the money is worth less now than when they were young.1074 mortgage refund, for example, in the 1930s, when the final payment is due, the only value 437 cash today.
One dollar is now always better than a dollar in one year, or 10 years.
How does the time value of our money?
You can not only deduct the amount of 20 years, the rate of interest on a mortgage loan mortgage 30-year mortgage interest rate.what you need to do is the current value of each mortgage calculator.
The current value of a mortgage 30 years for 1074 at an annual interest 5 rate rebates is 200 066.
The current value of a mortgage of 20 years for 1320 at an annual interest 5 rate rebates is 200 066.
Two repayment terms are exactly similar.
The 69 ' 756 save ' in the interest rate is really just the effect of adding additional 246 per month in repayment - in fact, 246 per month up to 59 040 adds more than 20 years.
What happens if you have taken as 246 per month and invest in, for example, the mutual fund?
If you get back 10 years likely after 20 years, you have 186 804.with inflation at 3, it would be worth 102 597 cash today.
Why banks recommends that you pay off your mortgage quickly?sure how revenue stream lasts longer, the better?
Banks can prove that their recommendations "save you money.", but in reality, banks include the value of time money they know the real value of these additional 246 per month you them now, not in the future, and less time for you to repay the mortgage, the lower their risk and faster money returned to can still be used.
There are a few arguments to pay your loan mortgage quick return on the one hand, faster you pay, grows faster your equity.but you must understand that every dollar you give the Bank now has a dollar, you can invest.
Give your money to the Bank to avoid paying interest of 5% means that you do not use this money to win 10 or 12 or 15 elsewhere.
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