Your home purchase may be the largest purchase you make in your life. Some people are able to save up money to purchase a home without taking out a mortgage. However, most people need to borrow money to afford to purchase a home. Mortgages are taken out for a certain amount of time from usually either 15 or 30 years. When you consider the interest charges you are paying, the sooner you can pay it off, the less you will end up paying.
Over the first years of your mortgage, a majority of your monthly payments is interest. To save money on the interest and pay off your home early is to try to put money towards the principal at the beginning of your mortgage and pay extra along the way as you can. When you send in extra money, send a note with so the entire amount is put towards the principal and they do not mistake it as an extra payment, where part will go towards the amount of interest. The lower your principal gets, the more of your payments goes towards the principal instead of towards interest.
Any extra amount can be put towards the principal. For example, if your usual payment is $544, if you bump it to $560, the extra $6 will make a difference in the long run. It is similar to retirement savings, every little bit helps. With retirement savings, the power of compound interest is on your side helping to make your money grow. With any kind of debt, compound interest works against you.
When you have a 30 year mortgage and make payments for the entire 30 years you may pay twice the original price of your home when including the interest you pay. Some experts suggest to take out a 15 year mortgage to save on interest. The monthly payments may not be much higher than a 30 year mortgage. If you can afford the extra amount each month, it may be worth your while to go this route.
A home mortgage in many cases is considered good debt, however in recent years many people may have purchased more home than they could afford or the values of their home dropped and now owe more on their home than it is worth.
In most cases, a home mortgage is needed to purchase a home. If you are able to, you can save a considerable amount of money by paying off your mortgage early.