Why Make an Extra Mortgage Payment?
Considering the current state of the economy, many people are trying to pay down debt to unburden themselves financially. Have you considered paying down your home loan? Your mortgage is probably the biggest debt you will have in your lifetime; paying it off early will save you potentially thousands of dollars that you’ll keep in your pocket, to spend on vacations or college tuition, or to save for a rainy day.
If you’re interested in paying down your mortgage faster, you can make just one extra payment per month — or even just one extra payment over the life of the loan. You’ll be surprised at how much you can save!
Making a Difference
Here’s an example. Say you have a mortgage for $210,000. Your interest rate is 4% and your original monthly payments are about $1,003. If you make just one extra payment of $1,000 on your loan, just once, you’ll pay off your loan up to three months earlier, saving you all the interest you would have paid during that time.
Now here’s a more exciting example. Using the same loan parameters above, if you add $50 to every monthly payment, you’ll pay off your loan nearly two years ahead of schedule. Take a look at your loan statement; how much interest will you save now?
And another interesting tip: A single large payment early in the life of the loan will shorten your term and reduce your interest payments more than a contribution made later on, although any additional payment will show benefits.
Courtesy of David Bumpers at Countryplace Mortgage