The Mortgage Strategy Most Homeowners Ignore
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.
