Mortgage Blog
Mortgage Prepayment Privilege
September 19, 2024 | Posted by: Sarabjit Dhuna
Understanding Mortgage Prepayment privilege can be extremely helpful to pay mortgage quickly and also how you can save money by paying mortgage faster. Mortgage Prepayment privilege usually denoted by 10/10 and 20/20.
In this article, I will try to explain what 10/10 and 20/20 means
10/10 and 20/20 number
The First number of 10/10 which is 10 means the % that you can increase mortgage payment. Second number 10 which means the % of the original amount you can pay in each year without paying any penalties.
For Example, with 10/10 mortgage prepayment privilege on 600,000 you can increase regular pay by 10% and second 10% means you can pay 10% of the original mortgage balance as lump sum each year.
Monthly Mortgage Payment
Most of the people have misunderstanding that you can increase mortgage payment by only first number of the percentage however, you can increase payment by more than first number without getting in any penalties.
For example, if you have 400,000 mortgages with 10/10 privilege. Your monthly payment at 4.54% for 25 years amortization would be 2,222.80 and if you maxed out then it would be 222.80. Total would be 2,445.60. If you may spread the amount for 10% (second number) it will be 40,000 for 12 months. You can make additional payment of 3,333.33 every month. This will bring total 5778.93 monthly mortgage payment.
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There are several lenders like banks or credit unions they don't allow you to pay both payment increase and lump payment so, it is really important that you choose right lender for the mortgage. Not every lender will offer flexibility for the mortgage payment privilege.
If you need more information about mortgage or if you are looking for any types of mortgage then contact us or visit our website Centum United Mortgage
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