If you want to pay off your mortgage early, you may want to add a little more money to your mortgage payment each month. This will get you out of debt a lot faster. Once your home is paid off, you can use those mortgage payments to pay down credit card debt, invest, home improvements or just save the money.
Savings
If you have a 30-year mortgage with an interest rate of 7 percent and monthly payments of $665.30 you can get your mortgage paid off 6 years early and save yourself $31,654 in finance charges just by adding an additional $50 per month.
Considerations
When you send in an amount over and above your regular payment include a note which states the $50 should go to the principal balance, otherwise it may not be posted correctly.
Amortization schedule
Take an amortization schedule and you will be able to see the difference by adding more money to your mortgage payment. If you add an extra $100, you can cut 10 years off the term.
Bonus
A yearly bonus can cut the term and finance charges as well. If you receive a year end bonus of $5,000 to be applied to the principal balance, run the new figures to see how much time you cut off your mortgage and how much is saved in finance charges.
Due date
Any amount of money going towards principal does not advance your due date. If you send in your regular payment of $665.30 and you include another payment of $665.30 to be applied towards principal, your due date will advance for the next month not two months in advance.
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