How Regularly Paying a little Extra off your Home Loan can Save you Thousands

Part of your monthly mortgage payment is an amount for interest charges. The interest will depend on what your interest rate is and the term of your loan. You may be able to save a considerable amount of money over time by paying a little extra regularly to your mortgage. If you have a 30- year mortgage, when you include what you pay in interest charges, then you could pay double the original price or more for your home. 

In the beginning years of your mortgage, most of your payment will go towards the interest charges with very little going towards the principal. You can save a lot of money and shorten the term of your loan by applying extra to your mortgage payments at this time. As the remaining balance decreases your principal amount will increase.

There are various ways to pay extra to your mortgage.

Instead of paying the entire amount monthly, if you change to bi-weekly payments you will end up making 13 monthly payments and cut up to six years off of a 30-year mortgage. This may also make budgeting your money easier since you are paying half the amount twice a month instead of the whole amount at one time.

If you receive a bonus or other money, then consider applying all or part of it to your mortgage. When doing this, remember to include a note stating that it is to be applied to the principal and that it is not an extra payment that includes interest and principal.

If you have room in your monthly budget, then set an amount above your mortgage payment and apply it to the principal amount. Even if it is a smaller amount and may not seem like it will make a difference it will. Any amount that can be reduced from your mortgage will save you interest charges over time.

Look at where you are spending your money to see if there are expenses that could be cut out or cut down on to have additional money to put towards to your mortgage payments. It may seem like a sacrifice at the time but you will be glad you did it once you own your home outright.

Many people are working towards paying off their home mortgages to have the security of owning their homes outright. By paying extra on your mortgage principal over time, you can end up saving thousands of dollars in interest charges.