Extra Payments to the Principal of your Mortgage

Our House

 

I am obsessed with my mortgage! I have found that my attitude on my mortgage is not the same as most people. My fiancé and I have decided to pay it off as fast as we can. We want to pay off our house before we have kids to reduce the stress of paying bills and be able to spend more time with each other. This goal requires we live as frugal as we can, not buying things that we don’t need i.e. new car, boat, swimming pool, etc.  Off the top of my head a few ways we pinch pennies is by shopping with coupons, we always drink water, and when we go out we split a meal. These are some small things that have helped up save lots of money over the years.

Ok for starters we have lived in our house four months and have been contributing extra to the principal every month.  A lot Extra! I thought this was the way to go until this morning when I was crunching some numbers. I still believe in paying extra but, what I found is how and when I pay is key. Here is my example:

 

Example

Mortgage: $100,000

Monthly Payment: $1000

Extra Monthly Payment to Principal: $1000

Yearly Lump Sum toward Principal: $12,000

$1000 x 12 Months = $12,000/Year

 

I want to pay my mortgage fast but, I also want to pay it as smart as possible so after looking at the number s I found that there is no difference from paying $1000 extra payment for 12 months than paying only the regular payment  then on the 12th month paying $12,000 all at once. These two examples will get you the same mortgage balance, at least at my lender it is that way. So instead of paying extra each month I will start setting this money aside in my own account and pay a lump sum in December each year. That way if I need the money for an emergency I will have it instead of having it locked up in my mortgage.

 

If you have any comments or question please leave them below. It is important that we help each other learn and grow.

Life Long Learning

Logan Pennington