The method to pay the mortgage fast: amortize your house earlier and save money

by James Stillston

Over time, the interest paid goes down. At the end of the 30 years, $63,916

will have been paid in interest and the total paid will be $188,916.

Savings and compound interest
The mortgage is paid with money, so you have to review the monthly finances. You have to calculate the monthly savings and not leave that money in the checking account, but invest it following the compound interest formula, which will multiply the money in the long run.

“Let’s imagine that we can save $150 per month and we are going to get an annual return of 4%. We will have to pay taxes of 21%, the average” he says. On returns, when we redeem the money, we will have to pay 21%.

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In the table you can see how from the second year interest and benefits are generated, specifically 57 of net benefits. This amount increases successively over the years until reaching thousands of dollars

The cross between mortgage and savings
The point at which the mortgage can be paid off is where the mortgage and savings lines intersect, specifically in year 21 from the beginning of the mortgage loan payment. From that year, $7,908 will be saved in interest and $15,598 of net profit generated with our savings will be paid. With the sum of these two figures we will have achieved a total of $23,506 in savings.

If this amount is deducted from the total mortgage ($188,916), we will have saved 12.44%, paying in total to pay off the mortgage $165,410.

How to get 4% profitability on savings
The first thing to be clear about is that it is a long-term investment and you don’t have to get nervous with the ups and downs of the market. Likewise, it must be an automatic contribution of money, which is done whatever happens with the markets.

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What product to invest in? The key is that you have a good share of equities. “In this case I have selected the benchmark MSCI World, which invests in companies around the world that are from developed countries,” he explains.

After three years, the average is 7.52% annual profitability, and since it was founded in December 2000, the annual revaluation has been 5.28% on average, despite the economic crises suffered during these 20 years.

“That is why it is very important to look at the long term. In that case, compound interest works in your favor and you should not get nervous with the fluctuations of the market,” he concludes.

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