An Easy Way to Shave Months - or YEARS off your Mortgage

Owning your own home is a wonderful feeling! Committing yourself to a mortgage of 30 years, however, is a 'not so good feeling'. This is especially true when you consider how much interest is paid over the life of the loan. For a $100,000 mortgage over 30 years, interest payments alone will be $115,838 --- WOW. There are several alternatives to paying this amount of interest, and have the loan paid off sooner.

One alternative is to finance with a 15 year loan...the advantage is obvious, interest over 15 years for the same mortgage would be $51894.....a savings of $63,944. The downside to this is that the monthly payments are increased by about $250....from $600 to $843. I know, if I could aford that, I would have bought a different house!!

Another option to shorten the mortgage is to pay the first month's payment on the first day following close on the property. As mortgage interest is calculated in arrears, you generally skip the first month's payment following closing on the property. This one action will reduce the term of the mortgage by about 7 months! The $600 paid early will result in a savings of about $4200 in interest over the life of the loan.

The final option is to pay additional principle on the mortgage each month. A lot is heard about bi-monthly mortgage payments, where lenders will allow you to pay every other week instead of once a month. By doing this, you make 13 monthly payments annually rather than 12. Most lenders charge a fee for this service. You can accomplish the same thing (and avoid the fees!) by taking your monthly payment and dividing by 12 (in this example $50), then adding that to the monthly payment and indicating that it is 'additional principle'. This option if done regularly will reduce your mortgage by nearly 6 years, and save a significant amount of interest over the term of the mortgage!!