The most common loan to get when buying a home is a 30-year fixed rate mortgage. The thought of paying for your home for the next 30 years may cause some fear and anxiety, but there are ways to shorten that term and save money over the life of your loan.
Any additional payments to the principal amount cut down the amount of interest you will pay over the life of your loan as well as cut the time you will pay down. To make these extra payments toward your principal balance, you must tell your lender/bank as they will not do this automatically.
Paying a little extra cash will pay off. You can put an extra 1/12 of your mortgage payment every month. Each year you will have put down one extra months worth of payments, shortening your loan term by 4 years and 8 months.
You can also pay an additional $50 per month. Fifty dollars may not seem like a lot, but this could save you tens of thousands of dollars in interest and cut down over two years off your loan.
When you are able, make one-time lump sum payments. If you find yourself with some extra funds, maybe after a yearly bonus or a tax return, pay that money towards your principal. This option is the less predictable than extra monthly payments, however will also cut down the amount of interest and time you will pay on the loan.
Get together with one of the PorchLight agents. We will sit down together and discuss the best way for you to shorten the term of your loan and save money in interest.