You Can Save Thousands Of Dollars Paying Off Your Mortgage Early

Paying off your mortgage early is probably not one of your highest priorities in these unprecedented days of severe economic recession. Like most people in the US, chances are you’re struggling to keep your home and worried about an upcoming balloon payment on the horizon.

However, this topic may be of interest to you if you are one of the fortunate individuals who have owned your own home for a while or have maintained your home despite the recession. By paying an additional monthly amount to your 30 year fixed rate mortgage, you can cut many years off the term.

This statement can be backed up by math principles and is not a scam. Instead, it is something that you can understand quite easily. Without visiting a website that will quickly calculate an early mortgage payoff, it is possible, as an example, to work with some theoretical numbers that represent the home mortgage.

What we can do next is divide the owed principle amount of the mortgage by the number of months left to pay off the mortgage. If this were a brand new loan there would be 360 months to pay on the loan to equal 30 years.

We can use a standard 30 year fixed rate mortgage for a $200,000 house with a 7% interest rate. When the term of the loan has been paid, 30 years later, the total cost of the mortgage is $479,000. This number was obtained by using an amortization loan calculator. Let’s see how we can lower that number since it is so large.

Our formula then would look as follows: $200.000 ‘f7 360 = $555.56. $555.56 is the portion of the monthly mortgage that is the average principle pay out over the length of the mortgage loan. I bet you’re thinking that you could cut your mortgage from 30 years to 15 years if only you were to pay that additional $555.56 on a monthly basis.

My friend, you would be wrong. Instead, it would only take 13 years and 10 months to pay off! Compound interest is working on your behalf when you are paying off your mortgage early. But how many people have an extra $555.56 monthly for an early mortgage payoff?

Few individuals can pay that amount of money. However, you could dramatically cut the number of years off your mortgage by paying a small additional monthly payment. We have established that you can decrease your mortgage by 16 years and 2 months paying an extra $555.56 monthly. Would you believe that you could pay off your mortgage in 22 years & 8 months by simply paying one quarter of $555.56, which comes out to $138.89 monthly? Essentially, this payment schedule is cutting more than 7 years off the 30 year mortgage term!

For an added mortgage payment of less than $140 per month, that’s not bad. Paying off your mortgage early is the point of this exercise and it’s just a means to get you thinking how adding a little extra money monthly helps. Hopefully, you now understand that an early mortgage payoff can be achieved rather easily.