HomeMany of us don't believe that a few dollars can make a big difference. In a lot of cases that is true. But when it comes to mortgages or any other type of loan, a few extra dollars can save you Big Bucks.
The chart below gives examples of three different loan terms and what paying between $75 to $100 more a month would do to the mortgage. It is based on a $100,000.00 loan at 7% interest.
---------------------------------------------------------------- YearsInt Rate Payment InterestTotal of PaymentsSavings
307% $665.30$139,508.00$239,508.00 N/A Round Payment to $750.00 $93,994.86$193,994.86$45,513.14This loan would be paid off in 259 months instead of 360.
---------------------------------------------------------------- 207% $775.30$86,072.00$186,072.00 N/A Round Payment to $850.00 $69,409.58$169,409.58 $16,662.42This loan would be paid off in 199 months instead of 240. ---------------------------------------------------------------- 157% $898.93$61,789.40$161,789.40 N/A Round Payment to $1000.00 $50,517.67 $150,517.65 $11,271.73This loan would be paid off in 151 months instead of 180. ----------------------------------------------------------------
By adding $84.70 to your 30 year loan you can save $45,513.14 and pay the loan off in 21 1/2 years.
By adding $74.70 to your 20 year loan you can save $16,662.42 and pay the loan off in 16 1/2 years.
By adding $101.07 to your 15 year loan you can save $11,271.73 and pay the loan off in 12 1/2 years.
You can also see by the chart that obtaining a shorter loan term when you buy your house can save a lot of money.
There are a couple of things that you need to check. First is that your loan agreement doesn't allow the loan company to charge penalties for early payment. Secondly, if you itemize your federal income taxes and deduct mortgage interest, paying less interest will mean a lower deduction. I believe it is safe to say that the interest savings will far outweigh the tax savings.
Even if you don't have $75 to $100 a month to add to your mortgage payment, even $25 would save a lot.
If you would like to have your own Loan Calculator, just visit www.pine-grove.com to download their Loan*Calculator! Plus. This is a free version and has everything the average family can use. It is also the Loan Calculator I have used for several months. Highly Recommended.
About the author: Terry Rigg is the author of Living Within Your Means - The Easy Way http://www.homemoneyhelp.com/ebookadpage.html and editor of The FREE Budget Stretcher Newsletter and Budget Stretcher web site http://www.homemoneyhelp.com. He has 25 years of experience counseling individuals and families concerning their personal finances.