| Reduce your principal and pay off your mortgage many years early, using this simple concept of making small payment increases once per year. As your income increases, apply a portion of the increase toward your mortgage. Even very small increases in the early years of a mortgage can quickly cut years off your mortgage. Calculate how this concept would work for your mortgage below. Learn more about mortgage principal reduction. | Year | Payment | Payment Increase
Over Prior Year | Payment Increase
Over Initial | Principal
Remaining | | More About Mortgage Principal Reduction - The underlying notion of this principal reduction plan is that most people will enjoy income increases on a regular basis. By using a portion of each income increase to pay additional principal, the mortgage can be paid down without affecting one's lifestyle and still allowing personal enjoyment of the increase.
- Aside from retirement savings, paying off your mortgage can be one of the most important steps you can take in retirement planning.
- Very small additional principal payments early in the life of the mortgage can quickly take years off the mortgage. In the first few years of a mortgage, the vast majority of each payment is interest, leaving a tiny portion for principal payment. Therefore, a small payment applied against the principal can be like making two payments.
Aditional Tips for Mortgage Principal Reduction - Make sure your mortgage allows for additional principal payments or early payoff without penalty.
- Always make sure additional payments are applied to principal. For payment by check, write "xx.xx Additional Principal" in the memo section of the check. For automatic withdrawal payments, make sure the additional amount is setup to be applied to principal. Contact your lender to setup additional principal for automatic payment plans.
- Mortgage interest is usually accrued daily. Thus, a late payment can increase the interest you pay and the overall cost of the loan. Making payments ahead of time will reduce the overall interest and possibly the length of the mortgage ... not to mention keeping your credit rating high. To further reduce your principal, make payments early whenever possible.
- Experiment with different increase percentages to see how it will affect your mortgage/payment and arrive at the best solution for your personal situation.
- To understand the effect of additional payments in the early years of the mortgage, add a small amount to the Current/first year payment and set the Yearly percentage payment increase to zero.
©2009 Dawg Ventures - All rights reserved.
|
