An Easy Way to Save Money on Your Mortgage

You pay the exact same sum on your mortgage each month, but a simple trick that doesn’t change the amount can save you a lot of money. It is a simple but powerful solution that not a lot of people are aware of.

We get paid each two weeks, as a rule. As we all know, things are usually easier at the beginning of these two weeks than at the end. And yet, we basically spend the same amount every week.

But we outlay the bulk of our money early in the period and then struggle at the end. The solution to this problem is to budget your funds in general, but budgeting your home loan payment, the biggest single expense for most people is sure to help the problem.

This simple trick saves thousands of dollars for most people, and will pay off a mortgage more quickly as well. For an $80,000 mortgage that has a 30 year term and a 7% interest rate, this simple trick can save in excess of $25,000.

Merely pay one half of your mortgage at the beginning of the month, and one half later, instead of all at the end. (This is what most people do, in order to make the beginning of the month due date.)

There is no real mystery to this: as you pay your mortgage earlier and earlier, you bring forward the eventual due date of the loan.

Because of this fact, your total interest payments are less.

Because of the way mortgage interest is calculated and paid down, most of your initial mortgage payments are allocated to pay interest, and only a small portion goes to principal. Since you pay so little of the principal, the interest keeps growing. But if you can speed up the amount of remittances, the principal part that is paid starts to rise faster. This will cause an early payoff of your whole mortgage!

Ask your bank if they have a form to make this choice, or just send an extra payment in well marked with your loan number. Alternatively, you can make copies of your payment notification and send them in with the additional payment.

As you can see, without any effect on the total impact on your monthly expenses, you have found the magic recipe for saving tons of interest and paying your mortgage down ahead of time.

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