Paying down your mortgage is one of the most important things that you need to do. The fact is that making a commitment to repay your mortgage in 10, 20 or 30 years, is a good choice. But, what if you could cut down that time considerably? Perhaps you could even knock years off of your loan by just making one extra payment per year. You may be one that is thinking that you can not afford to do this. Chances are good, though, that you can do it without even realizing it. Paying off your mortgage early is possible with one easy step.
How Does One Payment Matter?
Making an extra payment to your mortgage is something that you should consider because it can save you thousands of dollars. The fact is that just one payment can make a considerable difference in the total that you pay for your home and what’s more, it can shave years off of that mortgage. Take a look at the following example.
If you currently have a $200,000 mortgage loan and you have secured an interest rate at 6.5 percent, your monthly payment is likely to be $1264 dollars per month if your loan term is 30 years. This is a considerable payment and you may not realize that you will be paying much more that $200,00 on the home you are purchasing. The table below shows you the facts.
Original mortgage amount: $200,000
Interest rate: 6.5 percent
Term: 30 years
Monthly payment: $1264
Total interest paid on your loan: $255,088.98
How much you will really pay in full at the end of your term: $455,088.98.
What will likely be a shock to you is just how much you can save if in fact you add that additional payment to your loan. If you add just another payment per year of $1264 as in the example above, you could save yourself quite a bit of money. Here’s how this breaks down for you.
Original mortgage amount: $200,000
Interest rate: 6.5 percent
Term: 30 years
Monthly payment: $1264
Additional payment per year of: $1264
Total interest paid: $199,098.92
Total cost of your loan when paid in full: $399,098.92
Pay off date of the loan is reduced by: 6 years!
In this example, you see that you have not just cut into the amount of interest that you are saving by an outstanding savings of nearly $56,000 but you also have cut out the time that you will be repaying your loan down to just 24 years instead of the full 30 years. That savings can be figured out for your specific loan by using a mortgage calculator. You simply need to calculate what an additional payment per year will do to your loan.
Take the time to use a mortgage calculator to see just how much money you can save by investing one extra payment per year into your home. For those that have a higher interest rate than the example listed, the savings are even more. Taking charge of your mortgage is the first step.
If you have any questions, please call me at 214-769-2947. I would love to help you take charge of your mortgage.
Beth Brake: Owner/Team Lead
Performance Driven Excellence
Reprinted from MortgageCalculatorsPlus.com.