from Scripps Howard News Service Most families with a 30-year mortgage can't imagine actually paying off the loan. Thirty years seem like an eternity, and the total amount you pay with all that long-term interest is intimidating.
But others are determined to get free of the monthly housing bill once and for all, and with good planning, some sacrifice and a little luck, they eventually own their house free and clear, says a real estate columnist for Scripps Howard News Service.
If your goal is to burn the mortgage by a certain date--the children enter college, you and your spouse retire, you must start supporting an elderly parent--it pays to explore the innards of various kinds of mortgages.
With a 30-year mortgage, you will be paying more interest than principal for the first 20 years. If you started with a debt of $100,000 at 8 percent interest and stuck it out to the end, you would pay $164,000 in interest along with the principal.
People tend to buy the most house they can afford as soon as they accumulate enough for a down payment. Initially, they can't make payments on anything shorter than a 30-year mortgage. But as the years pass and income rises, it may be possible to eliminate the mortgage much faster.
For example, that $100,000 mortgage at 8 percent interest would cost $733 a month. Ten years into the mortgage, the principal would be $85,000. Another 20 years to go.
Here's an alternative. Refinance that $85,000 into a 10-year mortgage--not an adjustable but a simple 10-year mortgage--at 6.5 percent interest. The monthly payment would be $965--or $232 more than you're paying now. But the payoff is huge: You pay more principal than interest from the start and in five years your balance would be about $49,000, in eight years $21,000.
Keith Gumbinger of HSH Associates, a mortgage information firm, says most lenders don't advertise 10-year mortgages but can fashion one for you if you ask. "They probably do have one, though they may have to dust if off the shelf," he said.
Rates are about the same as those for 15-year mortgages--about 6.5 percent right now--in the HSH database.
