The Mendosa-Balboni Team believes that making additional payments towards your mortgage can be a wise idea as it can shave off years on the loan duration. For example, if you were to purchase a home like 45 Williams Road, Concord, it could also save you several thousands of dollars over the loan period. It is recommended that you do this on your own rather than enrolling in an accelerated payment plan as those can cost you hundreds of dollars.
Here are three great ways to pay down your mortgage earlier than anticipated.
Increase your monthly payment by one twelfth
The extra money that you are paying towards your balance is applied to the principal. The majority of the monthly payments that you make earlier on in the mortgage term are primarily interest so paying towards the principal will save you a lot in the years down the road.
One extra annual payment
Making an extra payment is easier if you receive bonuses or if you get a sizable tax refund. Apply these funds to your next mortgage payment towards the principal. This will also help reduce the principal so you will be ahead of schedule and shorten the years on the loan term.
Pay half of your regular payment every two weeks
Some mortgages will allow you to do this at no additional cost while others will require that you enroll in a plan for a charge.
In the end, after a year you will have made 26 half payments which translates into 13 full payments or 1 extra per year. To see a sample of the potential savings, a $200,000 30-year loan with one additional payment per year will reduce it to 26 years with a savings of over $32,000 in interest.