A borrower has a 30-year fixed mortgage and wants to pay it off in exactly 20 years without refinancing. What strategy would achieve this most efficiently?
Correct Answer
B) Increase the monthly payment by a fixed amount throughout the loan
To pay off a 30-year mortgage in exactly 20 years, the most efficient approach is to calculate what the payment would be on a 20-year amortization schedule and pay that amount consistently. This systematic approach of increasing the monthly payment by a fixed amount ensures the loan is paid off in exactly 20 years and minimizes total interest paid compared to irregular extra payments.
Why This Is the Correct Answer
To pay off a 30-year mortgage in exactly 20 years, the most efficient approach is to calculate what the payment would be on a 20-year amortization schedule and pay that amount consistently. This systematic approach of increasing the monthly payment by a fixed amount ensures the loan is paid off in exactly 20 years and minimizes total interest paid compared to irregular extra payments.
More Mortgage Knowledge Questions
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A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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A borrower with a $300,000 30-year fixed-rate mortgage at 6% interest discovers their payment was miscalculated and they've been paying $50 less than required for the first 12 months. What happens to their loan balance?
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