|
"How do I reduce the amount of interest
I pay on my mortgage?"
The simple answer to this is:
Make One Additional Mortgage Payment a Year
That's it. Make one or more additional payment(s) to your mortgage and you will save thousands of dollars in interest and pay your mortgage off faster then you expected. No magic potions, no extra fees, nothing to set up....just make that extra payment and save thousands of dollars.
Example: $100,000 loan, 30-year mortgage, 6.5% fixed interest rate
|
Extra Mortgage Payments/ Year |
Principal & Interest |
Additional Monthly Payment |
SAVINGS |
Total Paid |
# of Years |
|
0 |
$632.07 |
0 |
0 |
$227,542.98 |
29.92 / 359 mos. |
|
1 |
$632.07 |
$52.68 |
$29,088.02 |
$198,454.96 |
24.12 / 290 mos. |
|
2 |
$632.07 |
$105.35 |
$46,492.13 |
$181,050.85 |
20.5 /
246 mos. |
|
3 |
$632.07 |
$158.02 |
$58,320.95 |
$169,222.03 |
17.92 / 215 mos. |
|
4 |
$632.07 |
$210.69 |
$66,969.79 |
$160,573.19 |
15.92 / 191 mos. |
|
5 |
$632.07 |
$263.36 |
$73,607.77 |
$153,935.21 |
14.34 / 172 mos. | |
"How much will I save if I make an extra payment or two per year?"
The above gives a good example however every mortgage is different and let's say you cant make 2 extra payments but you can make 1.5 extra payments. Or if you have a 40-year loan instead of a 30-year fixed. The most important thing is, paying a little extra means you'll end up saving thousands of dollars in interest and reduce the length of your loan term.
One-time Payment
Keep in mind that most mortgages will permit you to make additional payments to your principal at anytime. Perhaps, five-years after moving into your home you receive a larger than expected tax return, or an inheritance or a non-taxable cash gift. You could apply this money toward your loan's principal, resulting in significant savings and a shorter loan period. |
