Most homeowners know they can make extra payments on their mortgage. What many don’t realize is how much money those extra payments can save.
Let’s look at a $500,000 mortgage at 3.99% and see how a few simple prepayment strategies can reduce interest costs and help you become mortgage-free sooner.
Without any extra payments, the total interest paid over the life of the mortgage would be approximately $290,927.
The good news is that there are several ways to pay down your mortgage faster, in turn helping you save on that interest. They come in the forms of:
Annual lump-sum payments
Increasing your regular payment amount
Accelerated weekly or bi-weekly payments
Small changes can have a significant impact. Let me show you.
A $2,000 annual lump sum would save you over $30,000 in interest and shave 2 years off of your mortgage.
Increasing your payments to $3,000 per month (from $2,636) would save you more than $60,000 in interest and shorten your amortization by nearly 5 years.
Switching to accelerated weekly payments would save you over $41,000 in interest and pays off the mortgage 3 years sooner
The takeaway? Paying a little extra today can save tens of thousands in interest and help you become mortgage-free, years sooner.
Want to see how these strategies would impact your mortgage? Reach out and I’ll run the numbers for you.
*Numbers used are for illustrative purposes only. Actual savings will vary based on your mortgage balance, interest rate, lender prepayment privileges, and future rate changes.
