Mortgage Payoff: Ever dreamed of owning your home outright, free from the shackles of monthly mortgage payments? Well, it’s not as far-fetched as you might think. A little extra cash each month can significantly shorten your mortgage term and save you a ton in interest. Let’s dive into how it works, shall we?
The Magic of Extra Payments
Think of your mortgage as a debt-paying dragon. The more you feed it, the faster it’s going to go away. By making extra payments on your principal each month, you’re essentially shrinking the dragon’s size. This means less interest to pay over the life of your loan.
Now, obviously this is only if you can afford to pay the extra money each month. Before you start throwing extra cash at your mortgage, make sure it fits into your overall financial plan. You don’t want to sacrifice other important goals like building an emergency savings fund. Assuming you can do it though, you won’t believe how much you can save in the long run!
Mortgage Payoff Calculator
So, lets dive right in. Lets say you have a 30 year mortgage, you borrowed $400,000 at a 7% interest rate. Over 30 years, you would be paying $558,036 in interest to the bank!! That’s more than you borrowed in the first place!
A lot of people think no big deal, I’ll just make my monthly payment and save a little and spend the rest of my money without thinking about how much money you are just handing over to the bank.
In the above scenario, you would have a estimated mortgage payment of $2662.21 per month (Not including Taxes and Insurance, this article isn’t about that cause hey, you have to pay that regardless of whether you have a mortgage or not).
If you would add $900 per month to your monthly payments, your new monthly payment would go up to $3561.21, and get this: You would knock your mortgage down from a 30 year to a 15 year mortgage, and you would save a whopping $306,079 in interest!
Lets give one more example: Lets say you have a 30 year mortgage, you borrowed $150,000 at a 7% interest rate. Over 30 years, you would be paying $209,263 in interest to the bank!! If you would add $325 per month to your monthly payments, your new monthly payment would go from approx. $997 to $1,322 per month, and you would knock your mortgage down from a 30 year to a 15 year mortgage, and you would save $112,947 in interest!
Click here to see Dave Ramsey’s Mortgage Payoff Calculator to see how much you can save by paying some extra money per month toward your mortgage:
Bottom Line
Paying a little extra each month on your mortgage can be a game-changer. It’s like giving your financial future a turbo boost. So, why not give it a try? Your future self will thank you.
You know the famous joke: “What’s the difference between a mortgage and a bad haircut? With a bad haircut, you eventually grow out of it so it isn’t too bad.” Well, after reading this article, you’ll be like “Don’t give me a bad haircut!” “Why not? Don’t you have a mortgage? Isn’t that worse?” And then you can be like “Ha, I did have a mortgage 15 years ago, but not anymore!” Then the barber will be like, “Ok, good for you, I guess I’ll concentrate then.”