Do you realize that you can save tens of thousands of dollars on your mortgage by paying the very same amount on it every month? It is a simple but potent solution that not a lot of people are aware of.
Most people today get paid every two weeks. As we all know, things are much easier at the beginning of these two weeks than at the end. This is strange, since we have almost the same expenses every month.
But we spend the bulk of our money early in the period and then run out of money at the end. The solution to this problem is to budget your funds in general, but budgeting the mortgage payment, the biggest single expense for most people will help the problem.
This simple trick saves thousands of dollars for most people, and will pay off a mortgage more quickly as well. For an $80,000 home loan that has a 30 year term and a 7% interest rate, this easy trick can save in excess of $25,000.
How to accomplish this this off- budget your mortgage payment out of each pay packet instead of the last one of the month. (Most people pay their mortgage at the end of the month, so it reaches the bank on the due date.).
When you pay one half of your mortgage two weeks earlier, the outcome accumulates, and your mortgage is paid off early. This will cause your interest payments to be less during the whole term of the loan.
The reason for this is that mortgages pay the interest down first, before the principal. Because of this, you continue to pay interest on the bulk of the principal. But if you can speed up the amount of remittances, the principal portion that is paid starts to increase more quickly. 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 mortgage number. You can also duplicate your payment forms and just change the month it is meant for.
It is hard to imagine that you will have no financial implications, because you are paying the same amount, but that in using this method you can save substantially and reduce the term of your mortgage.
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