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Make an extra mortgage payment every year
Make 13 payments in 12 months. There are a couple of ways to pull off this tactic. You can save up throughout the year and make an extra payment. Or, for those who get paid biweekly, harness part or all of those "extra" or "third" checks.
The equivalent of 13 payments a year will slice years from a new 30-year mortgage, Tyson says.
Let's say you got a 30-year mortgage for $200,000 at 4.5%, and you decided to add an extra 1/12th of a month's principal and interest to each monthly payment, starting the first month. Doing so pays off the mortgage 4 years and 4 months earlier, and saves more than $27,000 interest.
Minimum payments only
|Monthly principal and interest, years 1-5||$1,013.37|
|Years and months to pay off loan||30 years|
|Paying 1/12th extra principal and interest each month from the beginning||$1,345.45|
|Years and months to pay off loan||25 years, 8 months|
Bankrate's mortgage calculator lets you see how much time you can shave off by making an extra payment each year. Click "Show Amortization Schedule."
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