Interested in paying your mortgage off early?
There are many reasons why people pay off a mortgage early. They may want to be debt-free, or they may want the house paid off before retirement. Whatever the reason, there are a few ways to accomplish this without ‘breaking the bank’. One way is by making one extra payment a year.
The biggest share of your mortgage payments in the early years goes to paying interest, so paying a little extra on principal at the beginning makes a huge difference in the years ahead. The additional money you’re sending in reduces the balance of your principal, which reduces the amount of interest due on the loan.
Here’s some options in making one extra payment a year.
- Increase your monthly checks by 1/12th. This is a small incremental change in your budget that may be manageable.
- Make one extra payment a year. This option works well if you get annual bonuses or have a large income tax refund.
- Pay half of your regular monthly payment every two weeks. This works well for those who get paid bi-weekly.
Making additional principal payments will never reduce the monthly payment or allow you to skip a payment; however, it will shorten the length of the loan and it saves you money!
