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Even if you don't think you do, you already know plenty about commodities. Want us to prove it? No problem.
What makes oil produced in Saudi Arabia different from oil exported from Nigeria? It's the same thing that makes the corn you ate at last summer¿s barbecue different from the corn used to produce ethanol. Stumped? Well, don't feel bad, it's a trick question. The answer? Absolutely nothing. Corn is corn no matter where it comes from -- just as wheat is wheat and natural gas is -- right! -- natural gas. (Though the quality may differ, the make-up is uniform.)
So, in less elaborate terms, corn and oil (and all other commodities) are homogenous goods that can be processed, resold and more often than not, used as an input to the production of other goods or services. These goods are traded on a commodity exchange, thus setting the price-per-barrel (or other metric unit) used to value them.
Now pay attention, here's a question that indeed does have an answer: What is the difference between a commodity and a stock? While a stock can tank and become worthless, a commodity cannot have its value be wiped to zero. One other difference: Most commodities are traded in futures, meaning traders buy and sell where they think the price of a product will be at a certain point in the future. Stocks trade based on the value of the underlying company at that point in time.
Home / Personal Finance
Monday, August 25, 2008
One Extra House Payment Nets Big Cash
Don Taylor
Bankrate.com
Q: Dear Dr. Don,
I have a 20-year mortgage on my house and make roughly an extra payment a year. How many years am I really knocking of my mortgage? My loan was for $220,000 at 5.625%.
-- John Juncture
Dear John,
If you're a regular reader of this column, you know I'm not a big fan of biweekly mortgages. I don't see the need when you can do it yourself and save by making additional principal payments on your existing mortgage.
Making the equivalent of an additional mortgage payment each year gets you roughly to the same point as you'd be with a biweekly mortgage. You can figure it out for yourself by using the amortization feature on Bankrate's mortgage payment calculator.
I used the calculator for your mortgage and, if you've been faithful about making that additional payment every year since the start of the mortgage, your 20-year mortgage will be paid off in 17 years and five months.
That will save you about $21,800 in interest expenses, although that number ignores the tax impact of any lost mortgage interest deduction. (Bankrate's calculator rounds the interest rate up to 5.63%, so the savings and the interest expense aren't exact.)
I assumed that you made additional principal payments each month equaling about 1/12 of a scheduled monthly payment. The calculator gives you other options for additional principal payments.
Bankrate also has a biweekly mortgage payment calculator. I ran your inputs and it showed you saving $22,239 in interest and having the loan paid off in 17.3 years (17 years and four months).
Who needs a biweekly mortgage when you can do it yourself and not make the additional payments contractual?
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