So far we have looked at the amount of money that is paid out over the life of a home loan and how making a good sized down payment can help reduce the overall amount of money that is repaid to the bank or mortgage company. Now we will look at some other ways to save money on your mortgage.
Extra Monthly Payments Can Really Add Up
Another great way to save on the overall cost of your property mortgage is to put extra money towards your principal amount every month. Again we will use the figure of $400,000 and a 30 year loan with 5.0% interest. If you were able to put an extra $200.00 a month, only $50.00 a day, towards your loan repayment then you would end up paying off your loan in 25 years instead of 30 years and save over $74,000. While the extra amount may seem small at the outset, as you can see it really adds up to a significant savings over time.
Other Payments Can Scale Things Down As Well
Just like the extra monthly payments can add up, bulk sums can also be beneficial to reducing the time left on your mortgage as well as the overall amount of money that you pay on it.
- If you get a bonus from work each year, try to set that aside to go towards your mortgage. Putting an extra $3,000 a year toward your mortgage every year will enable you to pay off the balance in 24 years instead of 30 and will save you over $91,000.
- Another great way to pay down your mortgage and save money over the life of the loan is to make a one time bulk payments. This would work well if you got an inheritance or suddenly came into some unexpected money. A bulk payment of $15,000 would save you over $41,000 over the life of the mortgage. So if you took your one time lump sum and applied it to your mortgage instead of buying new furniture or going on vacation, it would save you a lot of extra money.
Property Options Australia
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Hi Sean,
This is excellent financial advice. Any extra money you get you can put on your mortgage and you’ll save a ton of interest. You can also put the money you get back from your tax each year on your mortgage.
All of these small amounts will add up over time and make a big difference.
A word of warning in regards to bulk payments, always check how much you are allowed to pay extra per annum without incurring a penalty fee. This is especially relevant to fixed interest loans as early repayment fee can be in the tens of thousands.
Just so you know I think, in the second paragraph, a day may be meant to be a week .