We know that around the last quarter of the year is not the time that you normally think about making extra payments on your mortgage, but it can really pay off. The truth of the matter is that you just need to think things through as they relate to your overall financial situation. If you really want to make it a goal to pay off your mortgage early, then you really need to think about making an extra payment or two.
It doesn’t have to be a lot of extra payments — even once a year making an extra payment can really pay off. Not only will you basically be making your payment entirely principal-lowering, you’ll have the peace of mind of knowing that your home is truly protected. Our biggest investment is our home, so why wouldn’t you want to make a payment that not only lowers your principal, but increases your overall equity?
A little math is in order. Let’s say that you picked up a 15 year fixed-rate mortgage — it’s pretty popular to go with a 15 year mortgage in order to not have to make mortgage payments the rest of your life.
One extra payment on a 15-year mortgage for $300,000 with a 5% interest rate is essentially $200 a month. This makes it a lot more affordable than trying to save up a bunch of money at the end of the year. Even though it doesn’t seem like it, this can take your number of payments total from 180 all the way down to 161. Think about that — that’s 19 payments! If your monthly payment is $2372, that means that you’re saving $45,068! What could you do with an extra 45 thousand dollars?
Quite a bit, actually. You could invest in repairs and improvements to your home, thus raising the value, or you can send your child to college very easily. You could also invest in your retirement and watch your money grow dramatically. It’s just a matter of looking at your goals and doing what works for you.
Some people aren’t into paying a lot of money extra to their mortgage, and that’s perfectly okay. You might want to skip paying extra payments in favor of decreasing other debts that you have. If you have a lot of credit card debt, it might be smarter to tackle that first rather than worry about the mortgage. Once you have your credit debt under control, you can go back to focusing on the mortgage. It’s really the best way to really make sure that you have things taken care of from start to finish — why not plan your own extra payments today? It’s really easy to do — just use an online calculator to figure out how fast you want to pay down your mortgage and the calculator will do the math for you!