AOL Real Estate published a great article about how much $$ you can save and how much quicker you can pay off your loan if you pay a little extra on your mortgage each month or even just once a year. Click on the link to read more details, but here are some important points.
1. Add $10/month to your monthly payment
- On a $100,000 30 year, fixed rate loan with 4% interest rate, you would save $3,191.78 over the length of the loan.
- It would shorten your loan by 13 months.
2. Add $25/month to your monthly payment
- On the same kind of loan as above, you'd reduce your total interest by $7,450.01.
- It would shorten your loan by 32 months (nearly 3 years).
3. Add $100/month to your monthly payment
- On the same kind of loan as above, you'd save $22,463.76 on interest.
- It would shorten your loan by 101 months (almost 8.5 years).
4. Make extra payments very early on
- The earlier you make extra payments the more you save.
- Using the $100/month example, if you start this after the first year of your mortgage, you'd save $20,989.52 and shorten your loan by 96 months.
- If you start your payments after year 6 of your loan, you'd only save $15,095.22 and shave just 78 months off of your loan.
5. One extra lump sum payment
- Using the same loan terms as above, if you make one extra lump sum payment of $5000 in month 13 of the loan, you'd save $10,071.64 and reduce your loan term by 31 months!
- If you made the $5,000 payment in year 6 of your mortgage, you'd save $7,944.04 and reduce your loan term by 27 months!
6. One extra lump payment a year
- If you make a $1,000 lump payment every January, starting in month 13, you'd save $19,005.19 and reduce your loan term by 85 months (about 7 years).
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