Did you know that a Boise homeowner who pays an extra $100 a month in principal on a $200,000 30-year loan with an interest rate of 4.5% can save $31,746 over the life of the loan and pay it off five years early? For checking how much you can save, use an online mortgage calculator to crunch some numbers. Pull up your mortgage statement to make sure you know the correct figures to obtain accurate information. You’ll need to know the original mortgage amount, annual interest rate, and years remaining on the loan.
Plug-in this information and sample additional principal payment amounts and find the best fit for your budget.
Methods for Paying Extra on Your Boise Mortgage
There are different ways a Boise homeowner you can approach this. If you get a one-time large windfall, you might consider making a single lump sum towards paying down your Boise mortgage. Or if you have been paying off credit cards and have freed up some cash flow, you can pay a little extra every month. Alternately, if you get Christmas money from family, you might make one extra house payment a year.
What You Need to Know About Paying Extra Principal
Make Sure Paying Extra Fits your Budget
Keep in mind that paying extra principal will not reduce your monthly Boise mortgage payments or free up immediate cash flow. This works because interest is front-loaded on a mortgage, so a small extra payment early in the life of the loan can save huge amounts of money down the line if you stay in that house until the mortgage is paid off.
Patience is Key
Because this pay-off of savings occurs at the end of the life of the loan, it only makes sense if you are currently financially secure. You should already have a cushion of six-months-worth of savings and have paid off other debts first. You should be able to max your retirement contributions and should be doing so.
If you already have all those bases covered, paying down the principal on your Boise mortgage early is a great way to get a lot of bang for your buck. Over time, the value of that small extra payment can really grow to astonishing proportions.
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