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Home / Loans / What Is the Best Way To Pay Off A Mortgage Early?


Early Payoff of MortgageThe largest debt most households have is their mortgage. Many of those same households would like to get out from under that debt. Short of selling your home, paying the mortgage off early is the only option available, but how should you go about it? Should you attack the debt by making a small additional payment each month or try to make a full extra payment once a year? Which method will pay the debt down sooner and save you the most interest over the life of your loan? Here are a few paragraphs that you may find helpful.

Additional Annual Payment

Let’s assume that you have a 30 year note at 7 percent on a $100,000 home. You would have a payment of $665.30 per month. If you made a full additional payment once a year, you would pay the loan off in about 21 years instead of 30. This method reduces you total interest paid from $139,508 to $106.660. Quite a savings!

Adding to Your Monthly Payment

Now, let’s have a look at how things would shake out if you paid extra every month. Breaking your payment down into 12 additional payments ($665.30/12) adds $55.45 to your payment. This means that you would be paying $720.75 each month. That reduces your total interest paid from $139,508 to $105,364. You would also pay the loan off two months sooner than you would by making a single additional payment each year.

Paying Extra vs Additional Payments:  Which is Best?

The difference works out to two months and a savings of $1,296. That really isn’t significant. So, which method is the best? Unfortunately, the answer lies within your checkbook. Can you realistically come up with an additional full payment each year or is a smaller amount each month more practical? If you do not think you can afford to make 12 smaller additional payments that equal a full payment, talk to your lender. The institution may allow you to make additional payments that are as small as $25 a month. Sounds silly, but $25 extra a month will cut three years off your loans, saving you over eighteen grand in interest. That is nothing to sneeze at.


About the author: Jerry Coffey


Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.


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