Pay Your Mortgage Off Early

Q: I am 56 years old and I just obtained a 15-year mortgage at 7.125 percent interest. I would like to pay this off before I retire at 62 years old.

Can I pay off my mortgage sooner? How much will it cost me per month? I want to increase my monthly payment, but I don't want to pay a fortune. (I am paying $950 a month now.) -- Jeff

A: You can certainly pay off your mortgage early. But you should check your related documents to see that there are no prepayment penalties.

To answer your questions in full, I need to know your principal amount balance and whether your payment includes tax and insurance before I can give you accurate figures. But you can get the numbers yourself by using the mortgage calculator on this page.

In the meantime, let's assume that you have a mortgage balance of $100,000 and that that figure includes principal, insurance, tax and interest. In addition to your current payment of $950 a month, you will need to pay an extra $750 per month to retire at 62. That will cut your number of payments from 180 to 76. In the end, you will save $38,840.85 in interest.

Get Money Out of Your Home

Q: What are my options on a reverse mortgage loan? Are there many disadvantages? -- Andrea

A. A reverse mortgage allows homeowners--age 62 and up--to convert their home equity into cash without selling their property or giving up their title. (The lender pays you, the borrower, thus the term "reverse mortgage.") There are additional side benefits. Borrowers needn't meet income nor credit requirements to qualify. And the closer you are to paying off your home, the greater the loan amount can be.

Here's how it works. A borrower can receive the money in a multitude of ways: as a one-time, lump-sum payment; as a line of credit; or as fixed monthly payments. Generally the loan can go unpaid until you move out permanently, sell your home or until the last surviving borrower dies. If the borrower passes away, their heirs can pay off the mortgage and still keep the home.

That said, given the age of reverse mortgage borrowers and the potential financial burden they could pass onto their families, most experts agree the loans are not worth the trouble. Unless you can guarantee that you will stay in your home for at least two years, they advise against the mortgages.