Power of pre-paying your Mortgage

Many individuals have not taken the time to understand the power of interest.  Banks earn their living off the interest and fees that we pay.  If we can somehow reverse that and save the interest and fees for ourselves, then we are far better off.

One way to save yourself from paying so much interest in by pre-paying on your mortgage a little each month or each year.  You'd be surprised, a little bit really gives a lot of savings.  Here are a couple of simple examples.

Mortgage Amount:  $100,000.00
Interest rate: 6%
Monthly Payment: $599.55
Total interest paid by end of loan:  $115,838.19
Extra monthly payment: $50
Total interest paid by end of loan:  $91,268.98

By putting an extra $50 a month towards your mortgage you end up saving nearly $25,000!

Maybe you can't do an extra payment every month, but you can do an extra payment each year at say tax return time.

Mortgage Amount:  $100,000.00

Interest rate: 6%

Monthly Payment: $599.55

Total interest paid by end of loan:  $115,838.19

Extra yearly payment: $600

Total interest paid by end of loan:  $90,515.25

This plan also allows you to save about $25,000!  The timing of your yearly payment will make a slight difference in the total amount of interest you will save. Check online for a mortgage calculator and you can plug in your specific situation.  If you can figure out putting even more extra towards your mortgage than you will save even more.

The main point is it is worth trying to find savings in some other areas of your budget so you can put it towards paying down your mortgage faster.  The peace that comes when your house is paid for cannot be found in any other way.