Most people think when you get a mortgage you’re stuck with it for 30 years, but what they don’t realize is by using a couple of easy and painless ways to make some extra principle payments you can cut years off the life of your mortgage and save thousands of dollars in needless interest costs.
Here are a few easy strategies you can use:
1. Round up to the nearest hundred
This is an easy strategy to take advantage of, and the results are dramatic!
Let’s say you have a mortgage of $100,000 over 30 years at 6% interest. The monthly payments would be about $600 dollars a month.
Now, let’s see what would happen if you rounded that payment to the next $100 by increasing your payment by $100 extra each month.
The Result:
By paying $700 a month you will shorten the length of your mortgage by over 7 years.
Just this one simple strategy will save you over $48,000 in interest payments over the life of your mortgage!
2. Use Your Income Tax Refund To Make One Time Pre-Payments
Not bad for a simple one time pre-payment!
Let’s say you have that same $100,000 mortgage, and you have a $1,000 tax refund this year.
If you take that $1,000 and apply it to the previously mentioned mortgage… you’ll save over $8,000 and shorten your mortgage by 1 year and 1 month!
3. Start Out With a 15 Year Mortgage
One of the best things you can do — if you can afford it — is to start out with a 15-year mortgage instead of 30.
It’s actually not that much more expensive, and the interest you save is incredible.
15-Year vs 30-Year ($100k Loan)
- Payment: Increases by only $240/mo.
- Total Interest: Drops to $51,200.
- Total Savings: You save $64,800 compared to the $116,000 interest of a 30-year loan!
By rounding up, using your tax refund, and taking a shorter mortgage, you can save thousands and be free of your mortgage years sooner!
That’s worth considering.
Summary: Mortgage Freedom Strategies
- ✅ Round Up: Paying an extra $100/mo can save 7 years.
- ✅ Lump Sums: Put tax refunds directly onto the principal.
- ✅ Shorten Term: A 15-year term saves massive amounts of interest.
Small changes in how you pay your mortgage today can result in huge financial freedom tomorrow.
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