With interest rates at historic lows, most of us have already re-financed our mortgages. Maybe even more than once in the past few years. Reducing your interest by even 1% can save you tens of thousands of dollars over the life of your loan. Another effective way to reduce the amount of interest paid over the life of your loan is to increase the prinicpal payment each month.
This might seem like a no-brainer and it is. But you might be surprised by how quickly the savings add up. For example:
Your home on Randlett is worth $600k. You have a 30 year fixed mortgage of $480k. Your monthly payments, including principal, interest & taxes are $3,000. By paying only the required amount each month, you will pay $345k of interest over the life of the loan. Yikes.
By paying $100 more towards the principal each month, you will reduce the total interest by $30k. Pay $200 more each month and the total interest is reduced by $55k. You will also pay off the loan 2-3 years earlier than the 30 year term.
Something to consider next time you make a mortgage payment.