Some advice on how to save thousands of dollars when buying a home


ATLANTA -- Psst!

Want to save thousands of dollars in mortgage interest?

Industry experts say it makes sense to plunk down a little extra each month to whittle down the

principal of your mortgage loan if you plan to live in your dream house for a long time.

The savings could be substantial, said Hugo Ottolenghi of Bank Rate Monitor in North Palm Beach, Fla. He gave this example:

NB A couple with a $100,000, 30-year mortgage fixed at 10 percent

could save $77,158 in interest if, by the third year of the loan, they mailed an extra check of $100 monthly to be applied to the principal only.

By doing so, the couple will pay off the mortgage in about 18 1/2 years, instead of the 28 years the two were scheduled to pay, Mr. Ottolenghi said.

But like most good deals, there are several caveats.

"If you plan to move in a few years, you're not going to gain much," he said.

In fact, "you may do better investing your money somewhere else," he said, adding that real estate isn't ap

preciating as much as it was in the past and could even decline in value.

Moreover, real estate is an illiquid investment.

"But if you plan to retire in 15 years, your kids are out of college, and you don't want to have to worry about making mortgage payments, it makes sense," Mr. Ottolenghi said.

He advised those interested in making principal payments to check with their lenders first to make sure there's no prepayment penalty.

Principal payments should be made by separate check, Mr. Ottolenghi added.

The check should say, "Apply to loan principal only."

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