If you have a job and are not behind on your mortgage payments and are considering letting the home foreclose because the value has plummeted, prepaying your home may offer some hope. You will still have overpaid for your home, but can save yourself 25,000-60,000 or more in interest over the life of the loan depending on your discipline level and amount of extra dollars you pay. It is easy to understand the frustration of someone who cannot get their lender to work with them on getting the payments lowered to just throw in the towel and walk from their home. But the bottom line is, if you are paying 700.00-900.00 per month on your mortgage and you decide to walk from it, you will still have to pay rent somewhere for that same amount or more. If that is the case, you may be better off prepaying your mortgage. By doing so, you save thousands on the back end, keep your credit, cut off 10-15 years off the loan, and keep your home. And you can pay whatever amount or whenever you have some extra dollars to throw at it. So if you have a job and a little extra money each month, you can save yourself a ton of money over the life of the loan and be house-debt free 12-15 years sooner. It all depends on your financial situation and how much saving your home means to you. It will take discipline and a small extra monthly (or one yearly) amount, but it can be done.
This information is more beneficial to those who have just purchased their homes because for the first several years the majority of your payment goes to the interest not the principal. (See amortization schedule “Paid Principal” column). As this column increases, it will take a little more extra monthly payment to make a dent. But don’t let that discourage you. Just begin with what you have now and increase as you can or if you can. I paid my house off in 14 years and saved myself almost 40000.00 dollars. Granted my house only cost me 39300.00 twenty years ago, but I had very little money to throw at it, and my income was less than 15000.00 per year at the time. I started off with only 25.00 extra dollars per month for 4-6 years, then $40.00 for the next several years, then 60.00 etc. Plus I would throw a little of my tax refund money at it as well some years. Whether you are paying 300.00 per month or 900.00 per month, the formula is the same.
The formula is—if you pay just ONE principal and interest payment EXTRA per YEAR, you will knock off 7 years of a 30 year loan. You will pay your home off in just 22 years. So another option would be to take your tax refund each year, assuming you get one, and pay one extra principal and interest payment each year. Or take the principal and interest amount that you pay monthly and divide it by 12 months and pay that amount extra each month. For example: if your principal and interest payment is 600.00. Take 600.00 divide it by 12 months and you get $50.00. Then pay $650.00 each month instead of your normal 600.00 and you will have met the required ONE EXTRA PRINCIPAL & INTEREST PAYMENT PER YEAR needed. You can prepay on a 15 year loan as well although I am not sure if the formula is the same.
Also be aware that if you do not pay your HOA assessments, then those are debts that stay with the home owner through foreclosure, and the HOA has been pursuing home owners who have gone into foreclosure, and we have had some success with recovering those funds plus legal fees, and interest. Please find the attached amortization table. Rather than letting your unit go into foreclosure, or walking away from it, your best option is to contact both your bank and Shiloh HOA board and take proactive steps with your situation. You may be able to get loan modification with your loan, and if the Shiloh board is aware of your situation, we may be able to put a stop to late payments and legal fees. Your bank may be able work towards a short sale with you.