Mortgages can be difficult to navigate, and if you have one, you may be wondering, ‘how much of my mortgage is principal?’
Keep reading to find out.
What Is a Mortgage?
A mortgage is a loan, essentially, that you have to pay back in full with interest over time. Many mortgages are structured to pay off over a long period, for example, 30 years. Your mortgage may be called a home loan or a home equity loan. This is important because most mortgages are structured as loans, not ownership of property. Not all loans are structured that way. Some loans, like student loans, have an ownership component. Other loans are more like credit cards in that you pay the money back as soon as you can.
For this reason, your loan will have a different name. For example, a loan for a new vehicle might be a purchase loan. Every month, your loan principal (the amount you have to pay off every month) is the amount you have to repay every month.
How Much of My Mortgage Is Principal?
When you get a mortgage, you put down a certain amount of money, and you ‘pay’ the rest with Interest. But, in many cases, you pay both the interest and the principal each month. That means, as long as you’re on the ‘pay-as-you-go’ model, your loan will always cost more than the amount you borrowed. In other words, if you’re paying $1,000 a month and your mortgage costs $200,000, your payment will be $2,000. But, if your mortgage is paid off, and you only pay the Interest, your payment will only be $200. You’ll save $800 per year. Some people don’t realize how important it is to keep their mortgage as a principal loan.
The Benefits of Paying off Your Mortgage Early
If you’ve already paid off your mortgage, you may be wondering why you should continue paying it off. But there are some benefits to paying it off early. First, your mortgage could be pretty expensive if you had several years left to go on the mortgage. By paying off the mortgage, you will be saving hundreds of dollars each month. Not only that, but you could free up a lot of cash each month.
Additionally, you’ll be getting that money out of your wallet faster. Let’s say you pay the same amount of money each month, and you’re paying off a 25-year mortgage. You’ll have $300,000 left in principal, and now that you’re paying the same amount every month, it’ll take you five years to pay off the loan.
What Is the Difference Between a Mortgage and Home Equity Loan?
Both are tied to your home, but they are not the same. A mortgage is a loan secured by a house. With a home equity loan, you loan money against your home equity (an additional amount). Both of these terms mean that the funds you borrow must be paid back. This is especially important to remember when discussing the terms of your loan. These two terms are often misunderstood. When you look at your loan agreement, you’ll see Interest as an attachment (along with the amount of principal and fees). However, there will be a line at the top of the loan agreement for many loans, which states that Interest is added as soon as the first payment is made (the exact terms depend on the lender).
Contact Utah Sell Now
Now that we’ve answered the question, ‘how much of my mortgage is principal?,’ contact the experts at Utah Sell Now today. We buy homes in the Salt Lake City, Utah, area in any condition fast and in cash so you don’t have to go through the hassle of staging and showing your home, or paying a realtor. Call us for your no-obligation written offer and you could have money in hand for your home in as little as seven days.