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Monthly Mortgage Payment
Extra Mortgage Payments Will Save you Money
It doesn't matter if you're thinking about a mortgage or you're fifteen years into 30 year fixed mortgage. There are lots of options and verifiable advantages to putting extra money on your principle. Extra payments to your mortgage will save you money in the long run. The first step is to understand how the principal and interest works in your mortgage.
The principal is the amount you borrow. The interest you pay is determined by the interest rate that you've qualified for and that is compounded over time. The amount of time is the number of years you'll be paying the loan. For example, a $100,000 loan at 6% interest over 30 years will result in over $115,000 in interest added to loan. Your mortgage payment will be about $600 each month. The amortization schedule for that loan shows that about $100 of that first payment goes toward your principal. The rest goes toward interest.
So how do you save money by paying more money on your mortgage each month? You send in extra principal payments toward your mortgage. Interest is usually compounded by the year. The remaining principal is multiplied by the interest rate and the quicker that principal amount lowers, the less interest you pay. Using the same example as above, an extra $100 a month paid toward principal will reduce the duration by nine years. Nine years without a mortgage payment isn't the only way to look at it. You're saving over $64,000 in interest, effectively putting over $7,000 a year in your pocket. If you don't have $100 in extra cash each month, you can save and make a lump payment each year. The result is the same.
Looking for a Mortgage? See the Current Interest Rates, ARM Rates and Interest Only Loan Rates. Also learn about all of the different types of mortgages breifly before buying a home.
40 Year Mortgage
30 Year Mortgage
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15 Year Mortgage
10 Year Mortgage
1 Year ARM Rate
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