Paying less interest on your mortgage is easier than you think!

If you were to make every payment on your mortgage without adding any extra to the principal your loan would look like this:

Loan amount                                  $250,000.00

Interest 6.5% (30 yrs)

Monthly payment  P/I                         $1,580.17

Total interest paid over 30 years       $318,861.22

If you were to make just one extra payment a year of 1580.00 in one lump sum or divide it over the months towards the principal for 30 years this is what you would save:

Loan amount                                  $250,000.00

Interest 6.5% (30 yrs)

Monthly payment P/I                           $1580.17

Extra payment every year                     $1580.00 (or 131.66 each month)

Total interest paid over 30 years       $248,879.53

That is a total savings of                  $ 69,981.69

And your mortgage is paid off in just under 24.5 years!

That's a huge savings!  Most people will not keep their mortgages for the entire 30 years.  However even if you sell your home in a few years you will have increased the equity in the property just by making one extra payment a year.  This can be done at tax time, with your tax return, or you could apply an amount to the principal each month. 

I recommend that you send a separate check to be applied to the principal and mark in the memo section of your check "apply to principal" to ensure it is applied to your balance properly. 

For more information on how to have more equity in your home or pay less interest talk to Kim Murphy, 1st Advantage Mortgage.

Helping DuPage, Kane, Lake and Cook Counties mortgage their homes for more than 10 years.