Thirty years is a long time.
If youre chipping away at a mortgage each month, it can feel even longer.
But what if you could eliminate that financial ball and chain bypaying off your mortgage early?
Youll also save tens of thousands of dollars in interest payments.
If youre not sure how you could pull that off, we have some ways to help.
How Paying on a Mortgage Works
Most people cant afford to buy a house outright in cash.
Thats your mortgage, and its typically paid back over 15 to 30 years.
Principal and interest are the main components of your mortgage payment.
Only a little goes toward paying off the loan principal.
Paying down the principal means you owe less interest each month because your loan balance shrinks.
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Additional principal payments also build home equity and help eliminate PMI faster.
Your regular monthly payment is $2,098.
See how the total interest ends up costing more than the purchase price of the house?
You read that right: $87,375 in interest savings.
But we realize that coughing up $2,098 around the holidays is tough.
So instead lets imagine you increased your mortgage payment by 1/12th ($175) each month.
With the same 6% interest rate, youd end up paying $2,273 instead of $2,098.
As you’ve got the option to see, those extra monthly payments pay off.
To figure out your own potential savings, use an amortization schedule calculator.
Otherwise, extra payments might go toward the interest which doesnt help you pay off your mortgage faster.
Single Lump-Sum Payment
Save up money throughout the year and put it in a special savings account.
At the end of the year, empty the account to make your 13th monthly payment.
Another option is setting up automatic recurring monthly deposits from your checking account to the savings account each month.
This way, youre not scrambling to come up with your bonus mortgage payment when December rolls around.
We Dare You to Take Control of Your Debt
Up for a debt challenge?
In 10 days,these 10 practical stepscould help you get back on the right financial track.
Paying a little above the minimum payment each month is easier for some people than making a lump-sum payment.
And it still helps you pay off your mortgage early.
Biweekly Payments
Some mortgage servicers let you sign up for biweekly mortgage payments.
This lets you pay half your mortgage bill every two weeks instead of once a month.
Doing so results in 26 half-payments or 13 full monthly payments each calendar year.
Those additional payments toward your mortgage can save you major money in the long run.
Some lenders charge prepayment penalties if you pay your mortgage off ahead of schedule.
Its crucial to confirm any extra payments apply to your mortgage principal, too.
Finally, check that your finances are in good shape.
Youll need to examine your entire financial picture and determine if your dollars are better spent elsewhere.
You also need to maintain ahealthy emergency fund, with enough money left over to cover your monthly expenses.
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Or you got a medical bill you werent expecting.
Or inflation has finally pushed your budget over the edge.
You dont need to go it alone.
When money is tight,these resourcescan help you manage unexpected expenses without stress.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer at The Penny Hoarder.
She focuses on retirement, investing, taxes and life insurance.
