One Simple Thing Can Save You A Lot Of Money On Your Mortgage
There is a simple trick that you can use to save thousands of dollars on your mortgage, without making any adjustment in your monthly payment. It is a very simple concept, but it has a big result.
Most people nowadays get paid every two weeks. This causes most people to spend too much in the beginning of the pay period and then run out of funds at the end. This is odd, since we have almost the same expenses every month.
But we outlay the bulk of our money early in the period and then run out of money at the end. The solution to this problem is to budget your funds in general, but budgeting your home loan payment, the biggest single expense for most people will help the problem.
You can shave as many as seven years off the term of your home loan with this process, and save thousands of dollars in interest while you do. Here is a good example: if you had a 30 year, $80,000 mortgage at 7%, you can save over $25,000 by paying your mortgage twice each month instead of once a month.
Simply pay one half of your mortgage at the beginning of the month, and one half at the end, instead of all at once. (Most people pay their mortgage at the end of the month, so it reaches the bank on the due date.).
The reason for this is fairly simple: by paying incremental pieces 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. While you are paying this small bit of principal, the interest contnues to grow. But if you can speed up the amount of remittances, the principal part that is paid starts to increase more quickly. This means that your total mortgage will actually be paid off earlier!
Ask your bank if they have a form to designate this choice, or just send an extra payment in well marked with your loan number. Alternatively, you can make copies of your payment form and send them in with the extra payment.
This secrert formula will bring your total home payments down, and you will not be paying a penny more out of your pocket!
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