The advantage of making extra mortgage payment seems rather straightforward – every payment that you make on your mortgage helps you cut down the term of your mortgage and save thousands of dollars on interest rates. Experts have calculated that just one extra payment a year can cut as much as five years off your mortgage.
In other words, by adding a little bit extra cash against your mortgage each month, you will be able to pay off your principal faster and drastically reduce the amount of interest that you owe the lender in the future. For instance, if you have drawn a mortgage loan of $100,000 for a term of thirty years and the interest rate has been fixed at seven percent, you can save as much as $34,000 on interest for the period of your mortgage by adding as little as fifty-six dollars to your monthly payment. You have to bear in mind, however, that making extra monthly payments does not reduce the amount of your future payments, neither does it exempt you from late payment fees if you skip some payments.
Having already discussed why it is a good idea to make extra payments against your mortgage, let us now focus on the “how to” aspect of this question. If you find it difficult to make extra cash each month which to put against your mortgage loan, you don’t need to worry: there are plenty of belt-tightening, money-saving tips that work just as well. First and foremost, you have to understand that a credit card is a false friend of those who want to pay off their mortgage earlier. It is rather obvious that you have to refrain from using your credit card as much as possible and when you do, you should use it wisely and responsibly. Use your credit card only in case of emergencies: paying medical bills or urgent home repairs count as opposed to front row tickets for the Super Bowl. Curing your depression through debt accumulation may actually add more stress to your worries (and definitely to your pocket).
In addition, paying off your mortgage earlier should be an inseparable part of your long-term strategy to get out of debt and live a stress-free life. In this line of thought, before attacking your largest loan, i.e. your mortgage, you may consider getting rid of other small debts such as car and aircraft leasing plans and consumer loans. Such a move will leave you with more free cash each month to put against your mortgage and repay it quicker. Remember that each dollar that you put against your mortgage today can save you thousands of dollars on accumulated interest in the long run.