Pay to Mortgage Off Early…Or Not?
A lot of people try to accelerate their mortgage. Let me rephrase that. These days, the people who can actually afford their mortgage, if they want to keep trying, do try to accelerate their mortgage, especially if, like us, you are stuck in a no win situation where your home’s value went down and you cannot combine your two mortgages into one because no one wants to refinance you for the combined amount due to your homes value and subsequent equity.
A lot of people are finding themselves in this situation now, because if you bought two or three years ago, you may have been talked into doing zero down and instead getting a primary and secondary mortgage, to avoid the PMI and then to also keep your money in your pocket. If I would have truly understood what that meant to us at the time we were talked into it, I probably would have given up the money we had saved up as a downpayment instead of paying off other bills with it, the move in costs, and all the new furniture we had to buy.
We moved into a home basically with no furniture and had to buy it all, so that took up a large chunk of what would have been our downpayment. Now, like I said, we’ve gotten ourselves into a bit of a predicament. The secondary mortgage, the one that basically paid the downpayment on the home, which was of course the smaller of the loans, was a lot higher of an APR than I wanted to pay. Let’s just say that it’s above 8%, so we’re paying out the ying yang for the privelege of not having to make a downpayment.
I realize that the mortgage lenders have to cover themselves because you are probably considered a higher risk not having any equity from the get go, and therefore they need to charge you more of an interest rate for that risk, but it really feels like you will never get it paid off when the interest is that high.
I always gulp when I see how much of that monthly payment is actually going toward the principle of the loan, and swear to myself that I will get this thing paid down as quickly as I can. But let’s look at the benefits of actually doing that. Are there any, really? I’m going to talk about that a little next time, I went too far off on a tangent this time, sorry!
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