|
How to Reduce Your Mortgage
One Additional Mortgage Payment a Year
There's a simple trick to significantly reduce the length of your mortgage and save you
thousands of dollars. The trick is to make one extra mortgage payment a year
and apply that payment toward your loan's principal.
This is the method being used by "Bi-Weekly Mortgage Reduction Services" and "Bi-Weekly
Mortgage Savings Programs". Only, when you do it yourself, you don't pay a third
party unnecessary set-up costs and fees!
Example:
$100,000 loan, 30-year mortgage, 6.5% fixed interest rate
|
Extra Mortgage Payments/ Year |
Principal & Interest |
Additional Monthly Payment |
SAVINGS |
Total Paid |
# of Years |
|
0 |
$632.07 |
0 |
0 |
$227,542.98 |
29.92 / 359 mos. |
|
1 |
$632.07 |
$52.68 |
$29,088.02 |
$198,454.96 |
24.12
/ 290 mos. |
|
2 |
$632.07 |
$105.35 |
$28,399.71 |
$181,050.85 |
20.5 /
246 mos. |
|
3 |
$632.07 |
$158.02 |
$58,320.95 |
$169,222.03 |
17.92 / 215 mos. |
|
4 |
$632.07 |
$210.69 |
$66,969.79 |
$160,573.19 |
15.92 / 191 mos. |
|
5 |
$632.07 |
$263.36 |
$73,607.77 |
$153,935.21 |
14.34 /
172 mos. |
|
One-time Payment
It may not be possible for
you to increase your monthly mortgage payment. Keep in mind that most mortgages
will permit you to make additional payments to your principal at anytime.
Perhaps, five-years after moving into your home you receive a larger than expected
tax return, or an inheritance or a non-taxable cash gift. You could
apply this money toward your loan's principal, resulting in significant savings
and a shorter loan period.
Example:
With a
$100,000, 30-year, 6.5% fixed interest rate mortgage loan, the borrower will pay a
total of $227,542.98 to pay back the loan in 30 years. That equals
$127,542.98 in interest payments.
If the
same borrower makes a one-time $5,000 payment the first day of year 6,
he/she will pay a total of $204,710.75 and pay off the loan in 27
years (324 months). That's a savings of $22,832.23 in interest.
|