Comments on: Should You Use A 40 Year Mortgage To Reduce Your Monthly Expenses? http://survivingarecession.com/40-year-mortgage Thu, 29 Oct 2009 00:42:06 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Thevail http://survivingarecession.com/40-year-mortgage#comment-437 Thevail Thu, 29 Oct 2009 00:16:52 +0000 http://survivingarecession.com/?p=290#comment-437 We did just this about 3 years ago when we bought our house. We could afford the payments on the 30 year motgage (fixed of course), but we opted for a forty year instead since the payment was a couple of hundred less per month. What we did was pay extra $100 onto the principle of the mortgage every month, which all went straight to equity. This plan actually saves us money on the mortgage long term, since for the next 38 years we won't be paying any interest on that $100. Whereas if the payment had been higher we would not have been able to pay the extra directly to principle. By our estimate we will pay the loan off in 25 years (5 years faster than the traditional 30 years) AND we'll save well over $100,000 in interest. This also leaves us with more equity than we would have had this early in the mortgage. As an added benefit, we can make our mortgage payment on what my husband would get in unemployment, which especially during a recession is a huge relief. We did just this about 3 years ago when we bought our house. We could afford the payments on the 30 year motgage (fixed of course), but we opted for a forty year instead since the payment was a couple of hundred less per month.

What we did was pay extra $100 onto the principle of the mortgage every month, which all went straight to equity. This plan actually saves us money on the mortgage long term, since for the next 38 years we won’t be paying any interest on that $100. Whereas if the payment had been higher we would not have been able to pay the extra directly to principle.

By our estimate we will pay the loan off in 25 years (5 years faster than the traditional 30 years) AND we’ll save well over $100,000 in interest. This also leaves us with more equity than we would have had this early in the mortgage. As an added benefit, we can make our mortgage payment on what my husband would get in unemployment, which especially during a recession is a huge relief.

]]>