If You Want To Save Money On Your Home Loan, Try This Simple Idea
Do you know that you can save tens of thousands of dollars on your mortgage by paying the same exact amount on it every month? It is a simple but potent solution that not many people are aware of.
Most of us receive our paycheck once each two weeks. As we all know, things are usually easier in the beginning of these two weeks than at the end. This is strange, since we have similar expenses every month.
The reason for this phenomena is that we pay the bills and spend extra e have the the money, and when we don’t, some bills don’t get paid. The solution to this problem is to budget your funds in general, but budgeting the mortgage payment, the biggest single expense for most people is sure to help the problem.
This simple trick saves thousands of dollars for most people, and will pay off a home loan more quickly as well. Here is a perfect example: if you had a 30 year, $80,000 mortgage at 7%, you can save more than $25,000 by paying your mortgage twice each month instead of once a month.
Merely pay one half of your mortgage at the outset of the month, and one half later, instead of all at the end. (Most people pay their home loan at the end of the month, so it gets to the bank on the due date.).
When you pay one half of your home loan two weeks earlier, the effect accumulates, and your mortgage is paid off ahead of time. In this way, you pay lower interest on the mortgage in total.
When you make a payment on your mortgage, the bulk of the funds is used for the interest and only a small part for the principal. Because of this, you continue to pay interest on the bulk of the principal. The faster you make those interest payments, the faster you will start to substantially lower the principal. This will result in an early payoff of your total mortgage!
Ask your bank if they have a form to make this choice, or just send one half in well marked with your loan number. Another idea is to duplicate your mortgage payment slip and adjust the due date on the additional copy.
As you can see, without any effect on the total impact on your monthly budget, you have found the magic recipe for saving tons of interest and paying your mortgage down ahead of time.
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