Money | Debts | Financial Freedom

Here Is An Simple Way To Save A Lot of Money On Your Mortgage

We all pay the same amount for our mortgage each month, so why not try this idea that will permit you to continue to pay the same amount, but saves you a lot of money on your mortgage? It is a simple but potent solution that not many people are aware of.

Most people nowadays get paid every two weeks. Because of this, we feel flush at the beginning of this two week period, but things get tight at the end. And yet, we basically spend the same amount every week.

But we spend the bulk of our money early in the period and then struggle at the end. The solution to this problem is to budget your money in general, but budgeting the mortgage payment, the biggest single expense for most people will help with the issue.

You can shave as many as seven years off the length of your mortgage with this process, and save thousands of dollars in interest as you do. Here is a perfect example: if you had a 30 year, $80,000 mortgage at 7%, you can save over $25,000 by paying your mortgage twice a month instead of once a month.

The method is simply to budget home loan payments and pay half out of each paycheck, instead of all out of one. (Most people use the second pay of the month to pay the mortgage since it will reach the bank by the first of the month.)

The reason for this is fairly simple: by paying incremental portions of your loan early, you are lowering the total term of the mortgage. In this way, you pay lower interest on the mortgage in total.

The reason for this is that mortgages pay the interest off first, before the principal. Since you pay so little of the principal, the interest keeps growing. The more quickly you make those interest payments, the faster you will start to drastically reduce the principal. This means that your total mortgage will actually be paid off earlier!

Your bank may have a designated form for this type of transaction, but even if they don’t, just send your money in with your mortgage number clearly marked on it. You can also duplicate your payment forms and just change the month it is intended for.

You pay the same exact amount on your mortgage each month, but because you pay half of it ahead each month, you reap the dual benefit of saving tens of thousands of dollars in interest, and you will pay your mortgage down earlier.

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