Mortgages last for decades, potentially into your retirement years. If you are living in your dream home and don't plan on moving in the future, consider paying a little extra on your mortgage each month to take years off the end of your mortgage. A little added to the principal of your mortgage each month adds up to huge savings in the long run. Having your house paid off at the time of your retirement will make your financial life easier, knowing your don't have to continue making that monthly mortgage payment.
[AD]Even if you plan on upgrading to a larger home in the future, paying a little extra on your mortgage each month adds to your equity and overall net worth. The savings on interest also means you end up paying less for your home. Whether you have a 15 or 30 year mortgage, a little extra each month is a great option. Check with your mortgage lender to make sure you don't have any prepayment penalties.
Of course, the amount you save off the end of your mortgage depends on the interest rate of your mortgage. The higher your mortgage interest rate, the more you save in the end.
Below are some examples of 30 year mortgages at 5% with paying a little extra each month.
|Mortgage Amount||Extra Paid Each Month||Months Taken Off End of Mortgage|
|$150,000||$100||77 (Over 6 Years)|
|$150,000||$200||126 (10 and a half years)|
|$250,000||$100||51 (12 and a half years)|
|$250,000||$200||89 (Nearly 7 and a half years)|
|$350,000||$100||38 (Over 3 years)|
|$350,000||$200||69 (Over 5 and a half years)|
Some additional tips on paying extra on your mortgage:
- Don't reduce the amount you contribute towards retirement.
- Do have other higher interest debts, like credit cards, paid off before applying extra towards your mortgage.
- Do pay extra when you have extra. Apply part of your tax refund towards your mortgage each year.