Paying Off Your Home – Leveraging Amortization

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You’re making mortgage payments, but ultimately the goal is to pay the loan in full so you have a place to live without a monthly payment. Every time you pay the mortgage, part of the payment goes towards interest costs and the rest goes towards the principle of the loan.

Amortization can be leveraged to help you pay the loan in full. Basically, amortization can be viewed as a built-in savings plan, because you eventually have a lot of equity in the home which is a big financial asset in the future.

How Amortization Works

Here’s an overview to help you understand how amortization works:

Let’s say you have a $400,000 mortgage. $460 of your month payment goes towards the principal balance, with the rest going to pay for interest expenses. Over time, a higher amount of your monthly payments is applied to principal and a lower amount goes to interest.

$460 per month doesn’t sound like much, but it all adds up over time. In just a year, you pay down the mortgage by thousands of dollars while building equity in the property. An amortization schedule over 10 years can add up to be as high as $100,000 towards the mortgage principal.

What Can You Do with $100,000?

Building $100,000 in equity is a great savings strategy. That $100,000 is yours at the end of the 10 years, and this investment can continue to grow as you pay the mortgage down and increase in property value.

Many people aren’t leveraging their cash because they don’t understand the long-term benefits of amortization. If you are using this strategy correctly, then it gives you a vehicle to keep more of your money in the future. Most people don’t have the cash to pay for a home in full, but they can use amortization to pay off the property and build wealth over time.

Looking for a Home in Temecula?

If you are ready to buy or sell a home in Temecula, then my team is just a phone call away. Call, text or email me so I can help you find the best real estate investment for your family. Reach out any time when you need more information: (951) 473-0390 or [email protected]