Your home mortgage is likely the largest debt you will ever take out. Mortgages are usually 15 years or 30 years in length. It is usually advised to make efforts to pay off your mortgage in a shorter time than that. If you pay if off earlier you will save a considerable amount of interest. If you take the entire 30 years to pay off the mortgage, you may end up paying twice the original price or more with the interest figured in.
The majority of your monthly payments for the first ten years or so of the mortgage is interest and you are paying very little towards the principal of the mortgage. If you are able to apply additional money towards the principal in the first years of the mortgage, you will save quite a bit on interest payments. When making an additional payment towards the principal, include a note that it suppose to be applied towards the principal so they don’t think it is an additional payment and they put some of it towards the interest also.
If your budget allows it, increase your monthly mortgage payment slightly. This extra amount will be applied to the principal and will allow you to pay off your mortgage faster. See if there are areas of your budget you can cut back on to have extra money to put towards your mortgage principal payments.
Another way to pay off your mortgage faster is to apply a lump sum once a year or so when you receive a bonus at work, tax refund or other source.
Some people consider the interest they pay on their mortgage as a tax advantage. But in reality if you pay $10,000 a year in interest and are in the 30 percent tax rate you will get a $3,000 deduction. If you own your home outright, you will owe the IRS $3,000, but you wouldn’t had paid the additional $7,000.
In recent years, some mortgages were interest only for a certain number of years. By doing this you will be paying more in interest and very little towards the principal during the first years when it is usually very important to pay as much towards the principal as you can.
You can save a considerable amount of interest payments and own you home outright sooner if you take these steps to pay off your home mortgage faster. Any extra amount you can apply to your home mortgage especially in the early years can save you a considerable amount of interest over the life of the mortgage.