Are you the kind of person who starts panicking every year in the weeks leading up to Christmas because you haven’t started your Christmas shopping? Let me suggest a fantastic last-minute holiday gift that will hold enormous value – and even increase in value – over time.
Which each passing year, the great Christmas shop holds less and less appeal for me, as I look around in dismay at the mountains of somewhat useless things I already own. That’s why I’m suggesting a gift that holds great value, as well as not adding to the over-accumulation of things.
Give The Gift of a One Time Mortgage Payment!
I don’t know how many times I’ve received gift certificates for pedicures I never have time to use, or purchased thoughtful but useless plastic “stuff” for friends, clients and family. For many of us a one time mortgage chunk can be miraculous over time! Especially in this low interest era. Interest rates will eventually have to rise, but a one time payment is directly applied to the principal.
How much can I put down?
It depends on the mortgage. Open mortgages usually have higher interest rates than closed mortgages, but they’re more flexible because you can usually prepay open mortgages, in part or in full, without a prepayment charge. Closed and convertible mortgages often let you make a 10% to 20% prepayment. Ask your bank or mortgage lender to help you find out.
How much difference does it really make?
Quite a bit, plus not only do you put that money towards your interest – preparing yourself for any higher rates in the future – you can also save the amount of the payment in interest over the amortization period!
If your mortgage is 350K mortgage @ 2.5% for a 5 year term, with a 25 year amortization
A $2000 lump sum payment =
Prepayment Savings
- By the end of the amortization period, with your one-time prepayment of $2,000.00, you save $1,707.53 in interest and pay your mortgage off 2 months sooner than if you had the same mortgage with no prepayment.
- By the end of the term, with your one-time prepayment of $2,000.00, you save $259.86 more in interest than if you had the same mortgage with no prepayment.
$1000 lump payment =
Prepayment Savings
- By the end of the amortization period, with your one-time prepayment of $1,000.00, you save $855.98 in interest and pay your mortgage off 1 months sooner than if you had the same mortgage with no prepayment.
- By the end of the term, with your one-time prepayment of $1,000.00, you save $129.94 more in interest than if you had the same mortgage with
$500 lump sum payment =
Prepayment Savings
- By the end of the amortization period, with your one-time prepayment of $500.00, you save $426.67 in interest and pay your mortgage off 0 months sooner than if you had the same mortgage with no prepayment.
By the end of the term, with your one-time prepayment of $500.00, you save $64.96 more in interest than if you had the same mortgage with no prepayment.