Title:
How A Mortgage
Calculator Can Make Your Annual Bonus Count
Word Count:
535
Summary:
An annual bonus
can be a wonderful windfall at the end of the year to do with as you please. It
could go into savings, a special purchase, paying down your credit cards or
into your house as a prepayment on your loan. When your mortgage is calculated,
either fixed or adjusted, you are told how much to pay on a monthly
basis.
However, a mortgage calculator that specializes in additional payments will
show it can be very much in your favor to consider this using your bonus a...
Keywords:
Article Body:
An annual bonus
can be a wonderful windfall at the end of the year to do with as you please. It
could go into savings, a special purchase, paying down your credit cards or
into your house as a prepayment on your loan. When your mortgage is calculated,
either fixed or adjusted, you are told how much to pay on a monthly
basis.
However, a mortgage calculator that specializes in additional payments will show
it can be very much in your favor to consider this using your bonus as an
additional annual payment
And you thought you were through with a mortgage calculator after you signed
the papers on your house.
The monthly payment your mortgage lender requires is the least amount you must
pay in order to keep current on your mortgage. It doesn't mean that you can't
pay more! If you have an annual bonus which comes in every year, then it is
definitely worth investing this by paying an additional annual payment against
the principal outstanding on your mortgage.
Use a mortgage calculator to work out how much difference your annual bonus
makes to your mortgage. Depending on the size of the annual bonus, and how much
of it you want to use against your mortgage principal, you can save money in
terms of interest you won't need to pay. This reduction shows up because you
are paying the loan off faster that your mortgage. The less time you owe, the
less interest you pay.
This is the "miracle of compound interest" your bank loves working
against him. When you pay ahead on the principal, you reduce the amount of
interest you pay on the interest. Poor him, lucky you. Your mortgage calculator
reveals the way to make it work for, not against you.
Another option you need to consider, however, is whether or not investing the
money in another way would be more beneficial. It might work to your advantage
to build up a larger amount and pay in that lump sum, say every 5 years, for
example.
Using the current rate of interest offered for an investment account that can
be opened with the amount of your annual bonus, work out how much in total you
would have at the end of 5 years. Then pull up the additional payment mortgage
calculator to work out what difference it would make to your loan.
The investment account pays you interest, and so you will have extra money to
pay against your principal. In the second part of this scenario: use the
mortgage calculator to calculate the mortgage if you paid the bonus directly
against the principal balance on your mortgage each year for 5 years.
Which of the two totals works best for you financially? If it looks too good to
be true, change mortgage calculators and double check. Which of them gives you
a lower balance and lower mortgage term? This is the option that most
effectively puts your money to work.
An additional payment against your mortgage principal is an ideal way of
investing your extra capital in your home. Use the mortgage calculator first
however to determine whether this, or an investment account, is the most
efficient use of your money.