mortgage

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

Just pay more
Just pay more | Hero Images/Getty Images

Just pay more

Divide your monthly principal and interest by 12 and add that amount to your monthly payment for a year. Result: You make the equivalent of 13 payments in 12 months.

Let's say you got a $200,000 mortgage at 4.5 percent. After five years of making the minimum payments, you add an extra 1/12 of a month's principal and interest to each monthly payment. Doing so pays off the mortgage three years and three months earlier, and saves more than $18,000 interest.

Minimum payments only
Monthly principal and interest, years 1-5$1,013.37
Monthly principal and interest, after year 5$1,013.37
Years and months to pay off loan30 years
Total interest$164,813.42
Add 1/12th to payment
Monthly principal and interest, years 1-5$1,013.37
Monthly principal and interest, after year 5$1,097.82
Years and months to pay off loan26 years, 9 months
Total interest$146,737.89
Your savings$18,075.53

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.

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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