You Really Can Save Money On Your Mortgage By Paying More

March 13, 2009 by  
Filed under On Your Mortgage

Mortgage payments are a bind, there is no getting away from it. It is fantastic to own your home but the interest on a standard mortgage is frightening and means paying thousands of dollars more than the initial loan..

Why? Because mortgages would simply not exist if the lender did not receive the additional interest, no one is going to lend in excess of $100,000 free of charge. So, is there really a way to reduce the interest and pay off the mortgage years earlier, also saving on private mortgage insurance? Yes, and it goes something like this.

Firstly, a little planning and frugality have to be applied, the rest is plain sailing.
The mortgage requires to be paid faster meaning higher payments per month to reduce the overall interest being paid. One method that is being practiced by many is known as the bi-weekly mortgage payment scheme. It is ridiculously simple where the mortgage is paid for twice in one month.

If you have an initial loan of $80,000 on your house over 30 years with a 7% interest rate and pay the mortgage twice per month you will cut the interest payments by $25,000 and clear the debt years earlier. The saving increases exponentially, the higher the loan the bigger the savings. A shorter mortgage term will equate to the same amounts of savings, however this is more difficult to qualify for initially.

You are actually just paying one additional mortgage payment per year with the funds paying for the principal sum as opposed to the interest.

Firstly, you can speak to your lender and find out the terms and conditions of your contract. Look out for any penalties for paying your loan early, although it may still be financially viable. You can use a specially adapted calculator to find out how much you would need to pay and how soon the loan could be paid off.

Failing that, you can approach an appropriate company to set up the payment plan. There is usually a fee of a few hundred dollars or a charge for each extra payment made. Many financial organizations are only too happy to help those wishing to pay their mortgage faster and save money, it is simply a matter of taking the first step and finding out your options.

You might be wondering how on earth you will be able to come up with this amount. As stated a little budgeting on all household costs should start to see a marked increase on extra spending money. Shop at discount stores and look for special offers and two for one when food shopping, you will be laughing all the way to the bank when you start to rake in the savings.

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