I’m sure you have heard people talk about making one extra mortgage payment per year. But what will it really do to the life of your mortgage, and how can you do it on a limited income?
Dave Ramsey and Suze Ormon are leading financial experts and have been saying it for years–make an extra mortgage payment every year to significantly reduce the life of your mortgage. Ramsey suggests up to eight years will be cut off the life of your mortgage by doing this, depending on your interest rate. There are others who disagree with this idea. They say that with the low interest rates we are seeing, it’s not worth paying your mortgage off – refinance and cash out to pay off higher percentage rate loans or keep the mortgage to earn tax deductions (especially if you’re in a higher tax bracket).
We have a few good ideas to help you make that one extra mortgage payment per year.
- Save. Yes, the old-fashioned way. Save your pennies and when you have enough to make the extra mortgage payment, send it in to your mortgage company.
- Pay your mortgage bi-monthly. Ask your mortgage company to bill you bi-monthly instead of monthly. The amount of your payment should be easily calculated by dividing your monthly payment by two. Because there are 26 bi-monthly payments per year, or 13 month’s worth of payments, you’ll be making an extra yearly payment.
- Pay your mortgage weekly. Ask your mortgage company to bill you weekly. Just as with a bi-monthly payment, a weekly payment will include 52 weeks in a year or 13 month’s worth of payments. Simply divide your monthly mortgage payment by 4 to calculate what you’ll pay weekly – there’s no confusing math to do.
We hope these ideas have been helpful. If you have more questions about this process, please feel free to contact us at Danny Murphy & Associates – we are happy to explain this further!
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