Your mortgage most likely represents one of the biggest purchases of your life -- and you'll be paying a lot of money in interest over the term of the loan. The more quickly you can pay off your mortgage, the less money you'll spend overall. Making even just one extra mortgage payment per year can save you tens of thousands of dollar and allow you to shave years off your loan, depending on how much you owe. The key is finding the method that works best for you.
Divide your monthly mortgage payment by 12 and add that amount to your monthly payment. For example, if your mortgage payment is $2,400 per month, you would add $200 to each monthly payment, making a $2,600 payment instead of the $2,400 payment. Over the year, this equals one extra mortgage payment.
Set up biweekly payments with your lender. Divide your monthly payment by two, then pay that amount every other week instead of once a month. You are thus making 26 half-payments or 13 full-payments per year. This method makes sense for those who receive biweekly salary payments.
Wait until you have a lump sum to make the extra payment. If you have a job where you receive a bonus, you can use this money to make an extra payment on your mortgage. This allows you to make the minimum payment on your mortgage each month, but still get the advantages of making an extra mortgage payment for the year.
- Contact your lender to be sure they are applying the extra money you're paying toward the principal balance and not applying it toward the next month's payment.
- Some mortgage companies charge a penalty for paying off your mortgage early.
Maggie McCormick is a freelance writer. She lived in Japan for three years teaching preschool to young children and currently lives in Honolulu with her family. She received a B.A. in women's studies from Wellesley College.