Increase your monthly mortgage payments to save money?
It may seem backwards, but if you have a lot of debt, increasing your monthly mortgage payment can leave you with more money at the end of each month.
How does it work?
A mortgage is typically at a lower interest rate than other kinds of debt, like credit cards, lines of credit and car loans.
You can add to your mortgage to pay off those high-interest debts and decrease your monthly costs substantially. This is called debt consolidation.
The savings can make a big difference to your monthly bills.
EXAMPLE: If your home value is $300,000 and your current mortgage balance is $185,000 then your home equity is $115,000
You could tap into your home equity and pay off some or all of your credit cards and loans to make your life easier.
Now, let’s say you also owe $10,000 on a line of credit, $25,000 on a bank loan and $50,000 on 7 credit cards.
In total you are spending $3,488.99 while you could be paying only $1,681.02 and reduce your monthly obligations by 51.82%.
|Credit Line||$10,000||$300.00||Credit Line||$0||$0|
|Bank Loan||$25,000||$505.35||Bank Loan||$0||$0|
|Credit Cards||$50,000||$1,500||Credit Cards||$0||$0|
|Total Owing||$270,000||$3,488.99||Total Owing||$275,400||$1,681.02|
This example is for illustration purposes only and it was based on the following assumptions: Before mortgage rate of 6% calculated semi-annually based on 25 year amortization; Bank loan 8% rate and payments spread over 5 year term; Line of credit and credit card payments equal to 3% of outstanding balances. After mortgage rate of 5.5% calculated semi-annually amortized over 25 years, insured at 2% with one time insurance premium. Annual Percentage Rate (APR) is 5.576%