When it comes to debt, a mortgage is usually the best debt you can have. It is backed by your home which, more often than not, increases in value over time. Interest charged on a mortgage is typically low. And a mortgage on your credit report is usually good for your FICO score (as long as you pay on time).
Strategies to decrease overall debt are done on a case by case basis; clearly I don't know your situation. However, I would typically recommend that you pay off your other, higher interest, debt before you put any extra income towards your mortgage.
That being said, if you are at a point where you are trying to pay down your mortgage more quickly then the below tactics may work for you. Be sure to check with your mortgage company to make sure that any extra payments that you make will go towards principal. Also, check to ensure that there is not a prepayment penalty.
For the following examples we are going to use a loan amount of $200,000 at a 4% interest rate. All payment amounts are principal and interest only; property taxes and home owner's insurance are not included.
Standard 30 Year Fixed Payoff Schedule
If you took out a 30-year mortgage today of $200,000 at 4% fixed interest your monthly payment would be $954.83. The mortgage would be paid off in the year 2049 and you would end up paying $143,739.21 in interest. So the total amount paid for the loan would be $343,739.21 (loan amount plus interest).
One Extra Payment a Year
So let's take that exact same scenario but make one extra payment a year. Sometimes people will use their income tax return to do this. Other's pay bi-weekly if their their mortgage company allows that. If you pay every two weeks instead of once a month you will end up making one extra payment in the year. So you think that one extra payment won't make that much of a difference? Here are the numbers. You would pay the mortgage off in 2045; that's 4 years sooner (actually 4 years and 2 months sooner if you want to be exact). Also, you would pay $120,675.81 in total interest. That is a savings of $23,063.40! For those of you that like percentages that is 14% faster payoff and 16% savings in interest.
One Extra Payment of $2,700 a Year
I mentioned using your tax return to make an extra payment but maybe your tax return is more than your monthly payment. According to the IRS the average tax return in 2019 was a little over $2,700. So what happens if you just put that $2,700 towards your mortgage each year? In this example scenario you would save $50,190.30 in interest (35% savings). You would pay off your mortgage in April of 2040; that 9 years and 3 months sooner (31% faster).
One Extra Payment a Quarter (every 3 months)
If you can set aside a few hundreds dollars each month and make an extra payment every quarter you will pay off your loan 38% faster and pay 42% less in interest. So that means making 4 extra payments a year will save you $60,371.46 in interest and you would pay your mortgage off in 18 and a half years instead of the traditional 30.
Double Your Payment
This is not often an easy thing to do, but if you can double your payment things get really interesting. For this example you would save $97,325.33 in interest. That's a whopping 68% savings. You would pay off your loan in May of 2030. That is 19 years and 2 months sooner or 64% faster. I know this may sound crazy, I mean who pays off their 30 year mortgage in less than 11 years? You do if you implement this strategy.
So remember that these numbers were generated for example purposes and yours will be slightly different depending on your loan amount and your interest rate. Also, my conclusions are based on making the extra payments from the very beginning. But it is never too late to start a plan for early payoff.
Lastly these are not the only strategies you can implement. For example, instead of doubling your payment each month just add in a hundred bucks to your payment. That will still save you money in interest and pay it off sooner. Some people may choose to refinance their loan for a shorter term (especially if there is a prepayment penalty on their 30 year). It will likely increase your payment but you will still pay it off sooner and pay less overall interest. If you have extra space you could rent that out and apply that monthly rent towards your mortgage.
There are numerous calculators online that you can use to help plan a strategy. My suggestion would be have the representative at your mortgage company run some numbers for you. That way you can also check on the rules of your mortgage.
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