mortgage

4 ways to pay off your mortgage early and calculate the savings

Pay an extra 1/12th every month

Paying extra starting 5 years into the loan

You get a $200,000 mortgage at 4.5%. After 5 years of making the minimum payments, you add an extra 1/12th of a month's principal and interest to each monthly payment. Doing so pays off the mortgage 3 years and 3 months earlier, and saves more than $18,000 interest.

Monthly P&I, years 1-5Monthly P&I after year 5Years and months to pay off loanTotal interest
Minimum monthly payments onlyMonthly P&I, years 1-5: $1,013.37Monthly P&I after year 5: $1,013.37Years and months to pay off loan: 30 yearsTotal interest: $164,813.42
Start adding 1/12th to payment after first 5 yearsMonthly P&I, years 1-5: $1,013.37Monthly P&I after year 5: $1,097.82Years and months to pay off loan: 26 years, 9 monthsTotal interest: $146,737.89
Savings from adding to monthly payments: $18,075.53

Just pay more

Divide your monthly principal and interest by 12 and add that amount to your monthly payment. End result: 13 payments a year.

Before you make anything beyond the regular payment, phone your mortgage servicer and find out exactly what you need to do so that your extra payments will be correctly applied to your loan, says Joel Doelger, director of community relations and housing counseling for Credit Counseling of Arkansas.

The mortgage payoff calculator lets you see the effect of making an extra payment each month.

Let them know you want to pay "more aggressively," and ask the best ways to do that, he advises.

Some servicers may require a note with the extra money or directions on the notation line of the check.

In any event, if you're putting extra money toward your loan, always check the next statement to make sure it's been properly applied, Doelger says.

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