The purpose of a loan is to eventually pay it off. Well, when you have a mortgage loan that can seem nearly impossible. Especially when your home is over $100,000. Surprisingly, though, making extra payments can actually shave off time from your expected repayment scheduled. You’ll be shocked at how much.
Benefits of paying more
Making extra payments has multiple benefits. For starters, it reduces the amount of interest you will end up paying. Your interest rate for your mortgage loan is probably pretty low. However, even the lowest rate on a very large amount of money can be quite a pretty penny. Paying extra will also pay down on the principal balance of your mortgage loan. Those extra payments can actually shave off a few years allowing you to pay your home off sooner.
Even if you don’t plan to stay in your home for 30 years there are still benefits to paying it off. By paying the principle down you’ll be able to build equity in your home quicker. For some loans, once there is a certain amount of equity in the home the private mortgage insurance (PMI) can be removed. That can save you quite a bit on your monthly mortgage payment.
Finding extra money
Finding extra money to make these extra payments may seem almost impossible. There are ways though! If you get paid bi-weekly, pay half of your monthly mortgage amount every other week. At the end of the year, you will have made an extra payment.
If making bi-weekly payments doesn’t work for you, there is an even simpler strategy. Save up all of your loose change. At the end of the year, cash it out and apply that towards your principle. You’ll be amazed at just how much the change adds up to be.
Is it worth it
You may wonder: is it really worth it to make those extra payments? You read the benefits. You know the strategies to apply. Yet, you need to know is it worth it to take money out of your pocket now for a bigger picture. The answer is yes.
It is best to eliminate your debt while you’re still young and working. Be as aggressive as possible with the extra payments. Paying off your mortgage is the ultimate way to set yourself up for retirement.