March 3rd, 2014 9:31 AM by Christopher Lear
Recently, I’ve had clients ask me about how to prepay on their mortgage. Of course, if you have an extra $100 per month, you may just want to add that to your monthly payment.
But there’s another way…by rounding up your mortgage payment.
So, let’s say that your mortgage payment is $957. Consider paying $1000 (or $43 more per month).
Here’s the dealio. You probably won’t notice the difference in your day-to-day expenses, but over the lifetime of your loan, the extra money will make a huge difference in decreasing your principal balance and save you interest. Paying an extra $43 per month adds up to $516 per year — which decreases the dollar amount you owe on the loan.
Depending on your interest rate and balance owed, you’ll also save money towards interest payments because the dollar amount of interest that you pay is directly related to your principal balance owed.
There are other ways to prepay your mortgage. You could contribute a lump sum once a year. Or make 13 payments a year (instead of 12).
If you’d like to know the difference that it makes in your mortgage, please let me know and I’ll provide you with an amortization schedule.