The day you close on your new home, it’s only natural that all focus is on receiving those long awaited keys to the front door of your dream! So many new possibilities open to you as you begin your new adventure.
This is a brand new chapter in your life, and with the excitement we aren’t ready at this moment to pay much attention to the Closing worksheet. We’ll deal with those details later, right now, we’re celebrating!
Relax! All the research shows you have made a sound financial investment in your future!
You may not be aware, but up front in the first couple of years of paying your mortgage is also when you will be paying the most in interest payments. Interested in saving money on those interest payments?
Here are a couple of sneaky little tweaks you may choose to make to your repayment schedule which could save you many thousands of dollars over the life of your loan:
SNEAKY TWEAK #1 - Round UP your mortgage payment and request all extra money above and beyond your regular monthly payment be credited toward the principle.
EXAMPLE: Let’s say your regular payment is $1074.38 per month. Pay $1200 each month, with the additional $125.62 going directly toward reducing the principle.
SNEAKY TWEAK #2 – Pay your mortgage every two weeks instead of once per month. As long as you make certain the full monthly amount is paid within each 30 day period, you will end up making extra payments each year, again, lowering the principle but also lowering the amount of interest you will be repaying.
EXAMPLE: $1074.38 divided by 2= $537.19 every two weeks. You pay $13966.94 per year instead of $12892.56. That’s an additional $1074.38, or one extra month’s payment per year. It may not seem like it, but just this one extra payment per year will save you thousands in interest costs.
Exactly how much you will save depends on several factors:
· Principle loan amount
· Interest rate
· Whether you have a fixed or adjustable rate mortgage
· Additional amount above amount due you pay each month
Even small amounts applied directly to the principle save you on the overall interest you will eventually repay and can add up to very large sums over the course of the loan.
HOW THIS WORKS: Since a home mortgage is amortized, interest is paid only on the existing principle amount still owing after payments are applied and then spread over the entirety of the loan. Every penny paid toward the principle not only lowers the principle amount due it lowers the amount of interest you pay.
Find even more fascinating ways to make your home ownership adventure the journey of a lifetime from your local RE/MAX Alliance Associate!