Paying one additional mortgage payment each year, whether in a lump sum or monthly increments, can lower a 30-year loan down to 18 years. If you pay more than one extra payment, the number of years will decrease even more.
Since this additional payment will be applied only to the principal and not the interest, you end up saving thousands and thousands of dollars once the home is paid off! And it also lowers the total amount of interest the borrower will pay, because it lowers the principal and length of time it will take to pay off the loan. So you save twice with each overpayment. Make sure you have pre-payment privileges in order to save.
By Julia from Boca Raton, FL
This page contains the following solutions.
I have been re-reading Possum Living by Dolly Freed. Her number one thrift tip is to have your house paid for.
Set your sights high. Know what you want, and then use every ounce of your being to get what you want. A number of years ago, my hubby and I decided to buy a house. We found the perfect house for us.
If you are in good standing on your Mortgage payments, many banks will put you on Bi-Saver payments which means that you pay one half of your monthly mortgage payment every two weeks.
To really cut years off your mortgage, make an extra payment a year but do it this way. Say your mortgage payment is 1200/month.
You can pay your mortgage payments bi-weekly, rather than monthly. Two more payments a year adds up a lot of savings over several years. I shaved several years off my mortgage by doing this.
If your mortgage payment is $1200 per month and you normally pay it on the 1st of the month, start paying $600 on the 1st of the month and then on the 15th of the month pay the additional $600.
Reduce the amount of interest you pay on your mortgage payments by simply adding additional principle dollars to the payments you make each month. You don't have to do this every month; you could do it once or twice a year if you receive bonuses or a tax refund.