Mortgage Basics - How to Manage Money
What does the term 'mortgage' actually mean?
The word 'mortgage' in fact derives from two different languages. The French 'mort' means to 'dead' and 'gage' originates from Old English and means 'pledge'. So to put it briefly, the word 'mortgage' actually means to a 'pledge until death'. Daunting huh? The last I checked, there aren't a lot of things I want to be entirely to eternally besides from my better half, and that's largely because I know she is reading this. Love you darling!
All jokes aside... A mortgage really is some thing that you committed to for a very long time rather than best bad credit installment loans. It typically takes some real gusto to find out how to manage correctly to make it work. Various banks are currently featuring 40 year terms. Can you imagine how tough it would be to still make month-to-month payments of $1,000 when you are approaching 70? I know that idea would terrify me to death.
Unlike most other types of loans, your mortgage is often negotiated numerous times before its paid off. Some people decide to make greater contributions monthly to pay it off faster. Other folks just pay the minimum amount. It's one more 'black and white' decision you may have to make when deciding how to manage money.
Let me clarify each side:
Let's suppose you've got a 30 year mortgage $250,000 at 5% but choose to make three extra contributions each year that are the equivalent to a regular payment ($1342). You will have paid off your mortgage in just 20 years. With the 'debt stacking' technique, you then put your usual mortgage payment of $1342 into a checking account for the remaining ten years at 5%. You will have saved $212,682 in that amount of time. If you were to include those three extra monthly payments you would have $265,853. If the money was invested at 10% the totals would be $282,322 and $352,902 respectively. Not bad. It pays to debt stack, however...
Lets say that you have that same 30 year mortgage of $250,000 at 5% and make the minimum monthly contributions of $1342, no more no less. Instead of using those three extra contributions towards your mortgage you add them to a savings account at 5% for 30 years. How much do you think you will have?
$280,857.
Now consider you can invest that money at 10% for that 30 year period of time. The total would be $728,478.
I seriously encourage that you use debt stacking for your high interest loans like credit cards but let your mortgage be. Pay the minimum and invest what you would like to contribute. The amount of money you would save will blow your mind. By following many of how to manage money tips like these on my blog you will increase the chances of really making money while you pay off your mortgage. Crazy huh?
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