You can conquer your mortgage by paying just a little bit extra each month. Here’s how.
By paying a little bit more on your mortgage each month, you can save thousands in interest and take years off the life of your loan. When you pay more on your monthly bill, you’ll need to specify that you want the extra to be applied toward your principal loan amount.
For these examples, let’s say you have a 30-year mortgage with 5% interest, and you pay $1,500 a month. If your own mortgage is higher, you can save even more when compared to these examples.
Here are some ways to pay off your mortgage more quickly:
1. Pay an additional 1/12 payment each month. Divide your monthly mortgage payment by 12 and pay that much more each month. By doing so, you’ll make an extra month’s mortgage payment each year. In the example above, you’d pay $125 extra a month, shorten your mortgage by four years and eight months, and save $42,000 in interest.
2. Pay an additional $50 a month. If you don’t want to make an extra mortgage payment each year, paying a more manageable sum will still work wonders. By paying an extra $50 each month, you’ll shorten your mortgage by two years and save $21,000 in interest.
3. Make one-time, lump-sum payments when you can. If you get extra money from work bonuses or tax returns, you can pay it toward your principal to cut costs. Though this option is less predictable, it still saves you money over time. If you have other debts, however, it may be in your best interest to pay those off first with your bonus money.
If you won’t be staying in your home for more than five to 10 years, it may not make sense to pay extra toward your mortgage. Each situation is different, however, and if you’re wondering which strategy works best for you, reach out to us. We can put you in contact with a loan specialist and get you on the path to paying off your mortgage. In the meantime, we look forward to hearing from you soon.