Save Money by Paying Down Your Mortgage
The other day I was curious about just how much you can save by prepaying your mortgage. “Prepaying” is when you make additional payments beyond what is required by the bank. Prepayments go directly toward paying off the principal remaining on the loan.
Prepayments can save you a substantial amount of interest. For example, with a $100,000 loan at 6% for 30 years, you will end up paying over $115,000 in interest over the life of the loan. But by paying just $25 extra on each loan payment, you will reduce your total interest cost to $102,000. This saves you $13,000 dollars, and allows you to pay off the loan almost 3 years earlier!
I put together the following chart showing different mortgage amounts and prepayment amounts. All figures are for a 6% mortgage for 30 years.