Making Extra Mortgage Payments
One of the most effective ways to build wealth is paying off your mortgage early. Here's how extra payments can save you money.
How Extra Payments Work
When you make an extra payment, that money goes directly to reducing your principal balance. This means:
- Less interest charged in future months
- Faster equity building
- Earlier payoff date
How Much Can You Save?
On a $300,000 loan at 6.5% for 30 years:
- $100 extra/month: Save $35,000+, payoff 6 years early
- One extra payment/year: Save $50,000+, payoff 8 years early
- Double payment: Save $200,000+, payoff 20 years early
Strategies for Extra Payments
- Biweekly payments: Make half your payment every two weeks (26 half-payments = 13 full payments/year)
- Round up: Round your payment to the nearest $100
- Annual lump sum: Apply annual bonuses or tax refunds
- Recurring extra: Set up automatic extra payments
Important Notes
- Specify extra payments go to principal
- Check for prepayment penalties (rare but exists)
- Consider other debt first (higher interest debt)
- Build emergency fund before accelerating mortgage payments