Mortgage Savings Tips
How to Reduce Your Mortgage
One Additional Mortgage Payment a Year
There is a simple way to reduce the length of your mortgage and save you money. You can do this by making one extra mortgage payment a year and apply that payment toward your loan’s principal.
Example: $100,000 loan, 30-year mortgage, 6.5% fixed interest rate
| Extra Mortgage Payments / Year | Principal & Interest | Additional Monthly Payment | SAVINGS | Total Paid | # of Years |
| 0 | $632.07 | 0 | 0 | $227,542.98 | 29.92/359 mos. |
| 1 | $632.07 | $52.68 | $29,088.02 | $198,454.96 | 24.12/290 mos. |
| 2 | $632.07 | $105.35 | $46,492.13 | $181,050.85 | 20.50/246 mos. |
| 3 | $632.07 | $158.02 | $58,320.95 | $169,222.03 | 17.92/215 mos. |
| 4 | $632.07 | $210.69 | $66,969.79 | $160,573.19 | 15.92/191 mos. |
| 5 | $632.07 | $263.36 | $73,607.77 | $153,935.21 | 14.34/172 mos. |
One-time Payment
It may not be possible for you to increase your monthly mortgage payment. Most mortgages will permit you to make additional payment to your principal at anytime. Maybe five-years after moving into your home you receive a larger than expected tax return, or an inheritance or non-taxable cash gift. You could apply this money toward your loan principal, resulting in saving on your loan and a shorter loan period.
Example:
With a $100,000, 30-year, 6.5% fixed interest rate mortgage loan, the borrower will pay a total of $227,542.98 to pay back the loan in 30 years. That equals $127,542.98 in interest payments.
If the same borrower makes a one-time $5,000 payment the first day of year 6, borrower will pay a total of $204,710.75 and pay off the loan in 27 years (324 months). That’s a savings of $22,832.23 in interest.
Need assistance? Please don’t hesitate to contact one of our New Orleans / Mississippi Gulf Coast region realtors at (504) 309-7224 today!