Your mortgage is likely the largest debt you will ever incur. And it seems impossible to tackle. With a new mortgage looming in the next week, we are more aware of this than ever. I will be 75 before it’s paid off the “natural” way. And Sam, well, he’ll be even older. We’d like to retire the debt much, much sooner. And we’ll do it one dollar at a time.
Whether you owe tens of thousands or hundreds of thousands, making extra principle payments each month will slash years off your loan. And even a little can make a remarkable dent in your debt. Maybe you don’t think you can pay off hundreds of thousands of dollars, but you can pay off one or one hundred.
Let’s look at an example to show you the power of a few dollars:
Length: 30 Years
Monthly Payments: $1663
Total Payments: $598,769
Let’s say you pay an additional $100 per month toward your mortgage principle. This accelerated schedule looks like this:
Monthly Payments: $1763
Total Payments: $531,990
You save $66,779 and pay off our mortgage four years and 10 months sooner!
Back in the day, we had mortgage payment coupons. Sometimes they had a line item for extra principle. Today with automatic withdrawal most common, just would send in a separate check for the extra principle with specific instructions for how it is to be used. Make sure it isn’t simply applied to your next month’s payment.
We’ll be discussing ways to increase your principle payments a little every month. Save a little here and a little there, and put the difference toward your debt. Over the next few months, I’ll be posting saving ideas for your home and your life. If you have any great tips, share them!