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Paying Off Your Home Loan Early

When we bought our first home, I was given some good advice. First, make sure it is written in the contract that you can prepay the loan without penalty. Second, get an amortization schedule from the loan company. The amortization schedule lets you see how much money goes to principle and how much goes to interest each and every month for the life of the loan. It's a real eye opener!

Basically, for most of the life of the loan, very little goes to principle and almost all of it goes to interest. But the amortization schedule allows you to calculate how far along you are in the loan if you choose to pay extra. You can knock off years and years of interest by doing this. We paid for the first house we bought in 4 years by just reading the amortization schedule and applying the small extra principle payment, often as many as 20 extra payments in one month. That house had a 20 year note. While we were there we made a few minor improvements, and sold it for 1/3 more than what we paid for it.

It requires being somewhat focused on that goal to be able to realize it. Because I did that instead of buying other things or having really any other savings. But I sure do not regret it!

I read all this stuff about refinancing your home loan. But if your home loan has no penalty for prepayment, then you can do the same thing. Just ask the loan officer to print you an amortization schedule.

 

 

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