HOW TO SAVE THOUSANDS OF DOLLARS IN INTEREST ON YOUR MORTGAGE

By
Real Estate Agent with Keller Williams Realty - Topsfield, MA 92593-B

Everyone wants to know how to save money on their mortgage. A real eyeopener is when you're at the closing table reviewing & signing the mortgage documents and you first see JUST HOW MUCH you'll REALLY be paying for your home once the interest is paid!!

Pam & I paid our 30-year mortgage off in 23-years using some of these techniques that the folks at KCM have put together. I've always lived by the motto "It's what stays in Hip National Bank (your pocket) that counts". 

How to Save Thousands of Dollars in Interest on Your Mortgage

One of the most common loans you can get to buy a home is a 30-year fixed rate mortgage. If the thought of paying for your home over the course of 30-years seems daunting, here are some easy ways to shorten that term which will actually end up saving you money over the life of your loan.

Any additional payments to the principal amount (the original sum of money borrowed in a loan), helps to cut down the amount of interest that you will pay over the life of your loan and can also help to shave years off the loan as well.

When you make ‘extra’ payments toward your loan, the key is to let your lender/bank know that you want the extra funds to go toward your principal balance as they will not automatically do this for you.

You don’t have to double your mortgage payment to make a big difference either!

If you have a 30-year mortgage on a median-priced home ($250,000) with a 5% interest rate, you’ll be responsible for a $1,342.05 monthly principal and interest payment. Over the course of the loan, if you pay your exact monthly payment, you will have paid $233,133.89 in interest alone!

Paying a Little Extra Can Pay Off Big

1. Pay an additional 1/12th of your mortgage payment every month

Benefit: In the example above, adding $111.84 to your monthly mortgage payment might not seem like a lot, but each year you will have paid one extra month’s worth of payments which will shorten the term of your loan by 4 years and 8 months, all while saving you $42,000 in interest!

2. Pay an additional $50 per month towards your mortgage

Benefit: Fifty dollars might not seem like enough to make a difference on the term of your loan, but that small amount will save you over $21,000 in interest and will take over 2 years off the end of your loan. Twenty-eight years from now, you’ll be happy to pay off your loan that much sooner!

3. Make one-time lump sum payments when you can

Benefit: If you find yourself with a little extra money after a yearly bonus, a tax return, or from investment dividends, paying that money towards the principal can cut your costs. This option, however, is less predictable than the extra monthly payments.

If you have higher interest debts, like credit cards, consider using any extra funds you have to pay those debts down before applying that money towards your mortgage. Also, if you do not plan on staying in your home for more than 10 years, paying extra toward your mortgage might not make sense.

Bottom Line

If you’re wondering what strategies would work best for you to shorten the term of your loan, consult a local real estate professional who can answer your questions or connect you with someone who can.

 

 

 

Posted by

I pray that God our Father and the Lord Jesus Christ will be kind to you and bless you with peace

2 Thessalonians 1:2

 

Doug Dawes REALTOR®, AWREP, LMC

Broker Sales Associate

KELLER WILLIAMS REALTY - Topsfield/Newburyport

49 Main Street
Topsfield, MA 01983
 978-887-3995  ~ Office
 978-270-3037  ~ Cell
 DougDawes@KW.com

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
Topic:
Mortgage / Finance
Location:
Massachusetts
Groups:
FOR SALE BY OWNER - MARKETING(FSBO)
Boston Real Estate
New Hampshire - Real Estate and Life in The Granite State!
MA REALTORS
Boston Area Real Estate
Tags:
interest rates
loan
bank
interest
payment
principal
mortgage

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Rainmaker
3,214,987
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

This is something we always suggest to first timers to increase their equity.

Dec 26, 2018 04:23 PM #1
Rainmaker
3,186,976
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Doug, excellent advice, just to give you an idea I suggested to Diane to do a 20 year mortgage and always suggested that we should add extra money to it she does not always do it, but when I get a decent commission she actually listens and we are shaving years off the mortgage, Endre

Dec 26, 2018 11:17 PM #2
Rainmaker
749,797
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Good Morning Sally K. & David L. Hanson 

It is a very good strategy for those with a mortgage

Dec 27, 2018 07:33 AM #3
Rainmaker
749,797
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Anything you can do to help ole Hip National Bank is a good strategy Endre Barath, Jr. 

Dec 27, 2018 07:34 AM #4
Rainmaker
1,296,606
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

My husband and I used this extra payment technique.  It was amazing how much additional equity is available toward the downpayment on the next home ... and ultimately paying off the mortgage. 

Jan 08, 2019 11:53 AM #5
Rainmaker
749,797
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Hi Carol Williams 

Yes, it is a great way to pay off a mortgage 7 years early

Jan 10, 2019 04:36 PM #6
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Rainmaker
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Doug Dawes

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