Make Additional Mortgage Payments and Save BIG!
If you were to purchase a $150,000 home with a $120,000 mortgage (80%) and the interest rate was 7% for 30 years, you will have paid over $167,410.68 just in interest. When you add your interest to the original $120,000 you borrowed that is more than 2.3 times the cost of the home!
You may be able to make additional payments to your mortgage that could save you thousands of dollars over the life of the loan and pay off your debt YEARS earlier? Take a look at the example below to see how as little as $25 a month can make a big difference.
| Money and years saved on a $120,000 mortgage by making additional principal payments |
||
| Additional principle payment/month | Savings over term of loan |
Loan will be paid off |
| $25.00 | $18,170.98 | 2 years and 9 months earlier |
| $50.00 | $32,631.78 | 5 years earlier |
| $100.00 | $53,836.30 | 8 years and 4 months earlier |
Example is based on a $120,000 loan at 7% interest for a term of 30 years. Additional payment was made every month.
The secret to this savings is to make early and consistent extra payments. The extra money you pay each month actually goes to what would have been your last mortgage payments and thus pays them off early. Each month you pay extra towards your principle, your final mortgage payment will be reduced until you won't need to make a final payment, then a second to last payment and so forth. Soon, you will have shaved years off your loan and thousands of dollars in interest charges off your mortgage.
Additional TIPS:
- Make sure that your mortgage company does not charge you a prepayment penalty.
- Make sure that when you make additional payments that you send a check separate from your monthly payment with instructions that the amount is to be applied towards the principle of your loan. Otherwise they may just apply it to next month's payment and still charge you the interest.
- Make your mortgage payments biweekly. Since many people get paid biweekly it makes it easy to budget and you actually will end up paying an additional monthly payment each year (26 bimonthly payments vs. 12 monthly payments). Also, since you are paying down the principle every two weeks rather than every month, your interest charges will be reduced.
