How To Pay Off A Mortgage Fast

Who Wants To Pay Off A Mortgage Fast -- The 30 Year Fixed Rate Alternative

Everyone wants to pay off a mortgage fast. But are you thinking this dream seems impossible? Think again!

I'll never forget how my jaw dropped when we bought our first house. Noticing the year of final mortgage payments, I asked my husband, "Honey, are you taking into account how old we'll be by the time we own our home free and clear? How will we ever retire?"

"No worries," the loan officer interjected, "the mortgage is amortized." If this was his attempt to calm my fears, it wasn't working.

Years later I became a loan officer eventually opening a mortgage company. My first time buyers were amused that I described getting a mortgage to own a home as my favorite oxymoron.

Amortization Schedule

A simple definition of an amortized mortgage is the gradual reduction of the mortgage balance by means of scheduled payments, beginning with more interest paid than principal in the earlier years. Both mortgage and amortization come from the Latin root "mort" meaning death.

To summarize for my borrowers, I'd explain, "Until death do we part with our mortgage." More to the point, "Until death do we owe."

But for those who want to pay off our mortgage early, what is the alternative to the oxymoron of buying a house by means of a home loan?

Consider This

After the first 15 years of mortgage installments on a 30 year fixed rate mortgage of $200,000 at 6%, a homeowner still owes $142,097 of principal.

In fact by the time the $2000,000 amortized mortgage is paid in full, a homeowner watches $431,671 leave their pocket. Now you're beginning to understand why a mortgage for a homeowner is an oxymoron, right?

Wouldn't you agree there has to be a better way to pay off a mortgage? Well there is! Meet the solution, the 15 year fixed rate mortgage.

This secret shared by experienced homeowners actually turns the dream of owning a home free and clear into reality.

Here's A Good Example

Assume you borrow $200,000 using a 15 year fixed rate mortgage. Speed up the clock just 15 years. You own your home free and clear!

Had you chosen a 30 year mortgage, you'd still owe $142,097 of principal and have an additional $74,000 left to pay in interest over the next 15 years.

A 30 year fixed rate would cost you approximately $232,000 in interest alone.

With a 15 year amortization, you save nearly $138,000 in interest payments and become free from your home loan in half the time.

In addition to paying off your house fast, another advantage of the 15 year amortization is a lower interest rate compare to its 30 year counterpart. This lower rate, in addition to the 15 year term, eliminates thousands of dollars in interest over the life of the mortgage. And after 180 payments, you own your house free and clear.

Now wouldn't you agree, this is how a homeowner can pay off a mortgage fast! And that's no oxymoron.

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Article No.101 by Kate Ford, real estate insider and author of Ask Kate. If you enjoyed this article, you will like A Simple Plan To Pay Off Your House also.

The calculations in this article are estimated and not, nor are they intended to be, a substitute for financial, real estate or legal advice. You should consult a lender, accountant, or trusted advisor such as an attorney for exact numbers and outcome. Interest rates vary and could determine different results.