Extra mortgage payments applied to your principal balance can reduce your mortgage greatly. If you add just one extra payment each year to your principal you can knock years off your mortgage!
However, here are some ground rules to follow before you start making extra payments:
Check with your mortgage company first to see if they accept extra payments at specific times or that they do not charge prepayment penalties.
Include a note on your extra payment that you want it applied to the principal balance. Specify that it is not to be applied to the following month’s payment.
If you want to get serious about paying off your mortgage quickly, check out our mortgage payoff calculator. It will help you estimate how quickly you can pay off your home.
Here are some other options for paying extra on your mortgage, as an example, a $220,000, 30-year mortgage with a 4% interest rate:
1. Make an Extra House Payment Each Quarter- You’ll pay your mortgage off 11 years early, and you’ll save more than $65,000 in interest.
2. Bring your Lunch into Work – Apply the $100 a month you save by bringing your own lunch to your mortgage will also save you more than $28,000 in interest.
Even just by adding $20 to your mortgage payment each month, based on our example mortgage numbers above, you’ll pay your mortgage off a year early, saving over $7,000 in the process.
3. Refinance—Or Pretend You Did. You can refinance a longer-term mortgage into a 15-year loan. Or, if you already have a low interest rate, save on the closing costs of a refinance and simply pay on your 30-year mortgage like it’s a 15-year mortgage. The same goes for a 15-year mortgage. If you can swing it, why not increase your payments to pay it off in 10 years?
4. Change your W-4 forms to get less of a refund and use that extra money to pay extra on your mortgage.
5. Apply your annual pay raise to the principal of your mortgage.
6. Maximize you down payment and buy within your means.
Consult an agent from Parkview Properties to help you, they can steer you in the right direction though the home buying process. They will assist you in finding the right house for your budget and they will direct you to financial experts who you can trust. Your agent will negotiate on your behalf once you find a home you want.