Pay More Now But Less Later: Tip-of-the-Day #96


Homeowners who pay a little extra toward their mortgage principal each month will save a considerable amount in interest payments over the life of their mortgage.

For example, if you have a $320,000 mortgage at 6.5% interest, your mortgage payments — not including real estate taxes and mortgage insurance – is $2022.60 per month. If you pay an extra $200 per month toward the principal, the balance declines faster and you pay less interest each year.

By paying just $200 extra per month, you reduce your total interest paid over the life of the 30-year loan by over $100,000. You also finish paying off the loan almost seven years early!

When my boyfriend and I first bought our condo we were paying about $400 more each month than we needed to. We did that for about five years. As a result, we've knocked off a considerable amount of interest and we're that much closer to paying off the loan altogether.

If you have the extra cash, and you consider the volatility of the stock market, you may want to consider investing in your home!

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