The most common type of mortgage is a 30 year fixed rate mortgage.
Since most lenders do not have prepayment penalties, you might not want to wait for 360 monthly payments to own your home free and clear.
You also might want to save thousands of dollars in interest. The interest rate the bank pays you on your savings is probably less than the interest rate you pay the bank on your mortgage.
Each mortgage payment has some principal and some interest. By paying back more principal sooner than required, your mortgage balance will reach 0 in less than 30 years. This can represent a huge savings over the life of the loan. Additional principal payments you make now will save on interest for the next 30 years.
You can pay off your mortgage early by making additional payments throughout the year, by making larger monthly payments than required, or by paying off your full principal balance at any time.
To make additional payments, just send your lender money at any time.
The entire payment will be treated as principal which reduces your balance.
If you want to save more money and make recurring principal payments, then set up automatic monthly payments that are higher than your amortized monthly payment.
By starting early, you can cut several years off your mortgage and save thousands of dollars in interest. For example, if you have 25 years remaining on a mortgage with a $280,000 balance, 5% interest, and $1,600 monthly payment, you could pay it off 5 years early by adding $238 per month. At the end, you will have saved over $39,000 in interest!
Use this calculator to determine how quickly you can pay off your mortgage.
|Current Monthly Payment:||
|Desired Years To Payoff:||
|New Monthly Payment:||$3299.78|
|Additional Monthly Cost:||$399.78|
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