Check out these ideas on how to reduce mortgage interest and find solutions for principal curtailment.
Shave thousands of dollars in interest off of your mortgage!
Many buyers today utilize 30 year fixed-rate mortgages. Would you love to shorten the term and save thousands of dollars over the life of the loan? Read on!
Additional payments can be applied to principal, which then reduces the amount of interest you’ll pay over the life of the loan, thereby shaving years off of the loan as well! When you do this, it’s important to be certain your funds are clearly allocated towards additional principal, so they are credited properly.
Let’s look at this example:
If you purchase an average-priced home for $250,000 at 5% interest, you’ll be responsible for a payment of approximately $1,342.05. If you never pay anything extra, you will have paid $233,133.89 in interest during the term of the loan!
A little extra money towards principal goes a long way!
1. Pay 1/12th of your mortgage payment each month towards additional principal.
BONUS: By doing so, you’ll add 1/12th of your monthly payment as additional principal, and by the end of year, you will have made the equivalent of one extra month’s mortgage payment! This will shorten the term of your loan by 4 years and 8 months – AND save you $42,000 in interest! (in the above example)
*Tip* – If you can manage to come up with funds to pay an additional half payment each month, your mortgage will be totally paid off in just 15 years! (WITHOUT the extra time & expense of refinancing!)
2. $1.65 per day = $21,000!
You read that correctly! Can you ‘find’ an extra $1.65 per day to apply to your mortgage? Perhaps downgrade your ‘designer’ coffee, quit (or cutback) on habitual items, etc.? By adding just $50 to your principal payment each month, you will pay off your mortgage earlier, saving approximately $21,000 (in the above example) AND shaving 2 YEARS off of the loan!
3. Bonus money? “Found money?”
Consider what happens when you get a raise at work. Most people will increase their spending to absorb the additional funds. What if you choose wisely & instead continue to live at the same lifestyle level & apply that extra $40-$200 (or more) additional dollars to principal! THAT is wisdom! Keep in mind these times where ‘found’ money appears and could be used to accelerate your mortgage payoff:
- Inheritance money
- Lottery winnings
- Paycheck/salary raises
- Tax return money
- Cash gifts
If you’re able to employ any &/or all of these tactics, you’ll find that your mortgage can be paid down very quickly, which is always a “win!”
Would you like to do some calculations of your own? We recommend the Dave Ramsey mortgage payoff calculator! You’ll find it here!
If you’re looking for additional information on home ownership – and/or looking to sell &/or buy a home,
contact The Jennifer King Team @ 717-723-9080 to put their local expertise to work for you! Ready to browse?
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