Published 29 December 2019
As 2019 comes to an end, many of us will begin thinking about our New Year’s resolutions. Some will pledge to lose weight, while others will strive to spend more time with family or find a better job. A scant few will vow to accelerate the pay off of their mortgage.
Paying off one’s mortgage is a satisfying and rewarding experience. Wouldn’t it be great to have your mortgage paid off by the time you retire? Wouldn’t it be terrific to have no mortgage at all? Accelerating the payoff of your mortgage is as easy as adding a few dollars to each monthly payment. The key is knowing how many dollars to add in order for the mortgage to be paid off on a date certain. Well, there’s an app for that.
The folks at FinancialMentor have created an easy-to-use online calculator that allows users to determine exactly how much to add to each monthly payment in order to achieve a zero-balance at a time that’s most advantageous to them. The process is as simple as entering a few numbers into the calculator.
The first step is to enter your current loan balance (the age of your mortgage is irrelevant). Step two is to enter your interest rate. Step number three is to type in the principal and interest payment portion of your monthly payment. The final step is to enter the number of years from now you’d like to be mortgage-free. The calculator will then display exactly how much you’ll need to add to each monthly payment to achieve your payoff goal.
As an example, a property owner who owes $120,000 on his or her 4.5 percent mortgage that carries a normal monthly principal and interest payment of $590.33 would have to add an additional $638.92 to each payment in order to achieve a zero-balance 10 years from now. In addition to retiring the mortgage early, the move would save our fictitious borrower $65,005.13 in interest.
If adding dollars to your payment each month puts a strain on your budget, you can also achieve your goal by adding lump-sums from time-to-time. Income tax refunds and employment bonuses can be applied annually and will achieve the same result.
Paying off your mortgage is beneficial in many ways. In addition to saving thousands in interest charges, the dollars that went to pay the mortgage can be redirected to savings or other investments. And keep in mind that paying no interest is far better than the tax deduction mortgage interest provides.
The financial site also provides other methods for accelerating the payoff of your mortgage. If you’ve never been debt-free, attacking your mortgage may be the ticket to getting there.
See you at closing.
Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at (575) 642-2292 or Gary@GarySandler.com.