By Saadiq Mance
Emerging Minds bCommerce
http://blackchipstock.com

Home ownership for African Americans has dramatically increased within the last twenty years, but I am sorry to say that this has not impacted the net worth of the African American community like it should. Although adding the thousands of dollars of a homes value to the bottom line theoretically should increase ones net worth, unfortunately, African Americans flush money down the seemingly bottomless pit of INTEREST payments instead of flushing money down the bottomless pit of rent payments. If you have a 30 year mortgage, here are the disturbing facts:

1) You will pay nearly 3 times the amount you originally borrowed before paying off your loan!

2) It will take you 23 years just to pay off 1/2 of the amount you originally borrowed!

3) It will take nearly $500,000 in gross income to net $300,000 in mortgage payments to pay off a $100,000 loan!

4) If you move about every 5 to 7 years, like most Americans, you are really paying 91% of your payments toward interest on your loan!

5) After paying your mortgage every month for 10 years, you will have paid off only about 10% of your loan!"

The reason why people are paying more for their homes than they should is because of how Mortgage companies have set you up. Nearly all mortgages are set up in the form of installment payments, and because these payments consist of almost all INTEREST dollars and very little PRINCIPAL dollars, in the first 5 to 7 years of your mortgage 91% of your payments will go toward INTEREST. What does that mean? It means that after making mortgage payments every month for 7 years, you have essentially paid nothing on the actual purchase of your home. The saddest thing about this is that many Americans pay for the purchase of their home their entire life and never own it out right until they die and their life insurance pays for it. But there is good news, you don't have to be one of those people and all it takes is a little discipline and fiscal planning.

There are millions of homeowners that are blindly overpaying on their biggest monthly expense just because they do not know better. This Emerging Minds bCommerce article explains two methods in which you can decrease the amount you pay towards INTEREST and increase the amount you pay directly towards the purchase of your home.

Method 1: Mortgage Pre-Payment: Paying more on your monthly mortgage payment than you have to.
Because most people don't understand how their mortgage is set up, they think that a 30 year loan that has a payment of $800.00 a month is better than a 15 year loan with a payment of say, $1,200.00 a month. Although you are paying less on a month-to-month basis, you are paying more INTEREST and are paying more for the total cost of your home. The reason for this is that you are paying more PRINCIPAL up front in a 15-year mortgage and therefore pay less in INTEREST.

What we suggest you do is to go ahead a get a 30-year mortgage, but pay it off in less time. This way you have the security of the lower payment, but you still get the benefits of paying less INTEREST. In case of a financial bind, you can revert back to the minimal payment and never risk losing your house. The key here is that you can set up your own pre-payment plan to suit your financial needs.

For example, say you want to set aside 10% of your monthly income for you family's long-term security. We suggest using at least 5% of this to pre-pay your mortgage every month, in turn investing in your family security by actually owning the deed to your home faster. This is just an example and I would personally suggest that you be as aggressive as your finances allow you. Your goal should be to try to pay off your 30-year mortgage in 15 years. The best thing about this is it does not take as much money as it appears it would to pay of your loan much, much faster than normal. See for your self with this Mortgage Pre-Payment Calculator.

Mortgage Prepayment Calculator
There are two things to be sure of when you do this:

1) Your mortgage lender does not have any pre-payment penalties. If they do, I would refinance with a company that does not.

2) When you pre-pay money, make sure you let your mortgage company know that the extra money is "TO BE APPLIED TO PRINCIPAL ONLY."

Method 2: Bi-Monthly Mortgage payments
Paying your mortgage Bi-Weekly is different from paying your mortgage the standard way in that with Biweekly payments you, the borrower, pay a 50% mortgage payment every 2 weeks rather than paying the 100% mortgage payment once a month as with your standard monthly mortgage. Because your mortgage is accumulating interest every week of the 52 week year, 26 "half-payments" made on a Biweekly basis would be equivalent to generating 13 months of a standard monthly mortgage payments in a 12 month time period. Essentially, you are paying back money before the mortgage company can charge you interest and that "13th Month" payment applies solely towards the pay back of the PRINCIPAL of the mortgage. In fact, you will make an additional half payment every six months and will significantly shorten the life of your loan by saving up to 10 years of payments and thousands of dollars of interest. For a more detailed explanation go to any search engine and type "Bi-weekly Mortgage."

The Ultimate Method
If you are a really aggressive investor, and want to maximize the return on your home we suggest that instead of doing either one of these methods mutually exclusive, you do a combination of both. The idea here is that you not only prepay your mortgage, but you divide the amount you want to prepay into biweekly payments. So now instead of paying 120% of your mortgage payment a month you pay a 60% mortgage payment twice a month. In doing this you will save a dramatic amount on the overall cost of your home.

Saadiq Mance is the Managing Editor of Emerging Minds News, Culture, & Business Magazine. He is an avid investor in the stock market, with more than 6 years of experience online trading and researching Black publicly traded stocks. His investment methodology is to find stocks with high profit margins and high cash to debt ratios, which also have low P/E ratios. He typically will hold a stock for at least 1 year and discourages day trading. Currently, he is encouraging investors to diversify at least 50% of all investment and savings dollars into precious metals, particularly silver bullion coins. For more information visit http://blackchipstock.com