04/25/2025
Ever dream of being mortgage-free sooner? How, you ask me? By making extra mortgage payments. Trust me, even a little extra can make a big difference over the life of your loan. Let's break it down!
The standard mortgage amortization schedule means that in the early years, a large portion of your monthly payment goes towards interest, and only a small amount reduces the principal (the actual loan balance). By making extra payments, you directly attack that principal, which has a snowball effect: less principal means less interest accrues over time, and you pay off your loan faster.
Let's look at some examples. Imagine you have a $300,000, 30-year mortgage with a 7% interest rate. Your monthly principal and interest payment would be approximately $1,995.93. Now, let's see what happens when you make extra payments.
■ Extra Payment Amount Per Year: $1,995.93
▪︎ Estimated Time Saved: Approximately 4 years and 4 months
▪︎ Estimated Total Interest Saved: Over $47,000
Host: That's right! Just one extra payment a year could shave over four years off your mortgage and save you a significant chunk of change in interest. Think about what you could do with that extra time and money!
■ Two Extra Payments Per Year. Now, let's say you manage to make two extra full monthly payments each year.
Extra Payment Amount Per Year: $1,995.93 x 2 = $3,991.86
▪︎ Estimated Time Saved: Approximately 7 years and 6 months
▪︎ Estimated Total Interest Saved: Over $75,000
This is NO joke! Ask your Loan officer! RIGHT NOW!
■Three Extra Payments Per Year. What if you aimed for three extra full monthly payments annually?
Extra Payment Amount Per Year: $1,995.93 x 3 = $5,987.79
▪︎ Estimated Time Saved: Approximately 10 years and 1 month
▪︎ Estimated Total Interest Saved: Over $98,000
2 quick important tips:
-Check with your lender: Ensure there are no prepayment penalties. Most standard mortgages don't have them, but it's always good to confirm.
- Specify principal reduction: When making an extra payment, clearly indicate to your lender that the extra amount should be applied directly to the principal balance, not towards your next scheduled
