Plat Forms

Let’s say that you buy a house with a thirty-year mortgage of $150,000 at 8 percent. You will be scheduled to make 360 payments of $1,093.35, paying a total of $393,606 by the time your house is paid for. That interest can sure add up, to the tune of $243,606, over time. However, if you pay off this thirty-year mortgage in fifteen years, you will pay far less in interest. Your payments would be higher, $1,423.98 a month rather than $1,093.35, but since you would be paying them for only half the time, you would have shelled Out a total of $256,316 to own your house free and clear, or $137,290 less than if you did it over a thirty-year period of time. That’s quite a savings.
If this is something you’re thinking about doing, please make sure you consult a financial professional. There are other factors to consider—the present tax deduction on the interest from a primary-residence mortgage; what the $330.63 difference in monthly payments would add up to if you invested it well instead (and whether you would be disciplined enough to do it). This is an emotional decision, too, as well as a financial one: if you bought a house with a thirty-year mortgage at age forty, how would you feel knowing that those monthly payments would cease when you were fifty-five? Or when you were seventy?
Several other options are available to you as well. Sending in one extra mortgage payment per year, for example, and specifying that it be used against the principal will start to reduce a thirty-year mortgage. Asking your bank to withdraw half of your payment of $1,093.35 every two weeks from your account, rather than sending in the entire amount monthly, will pay off the thirty-year mortgage sooner as well.

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