I don’t know about you, but I’m not a fan of paying my mortgage.
Don’t get me wrong, I like my home; I just don’t like paying for it. Well, I’m fine with paying the principal, but not the interest, really.
Unfortunately, if you have a conventional thirty-year loan, a full half of the price you pay for your house is interest. That’s right, you pay just as much in interest as you do in principal. So, a $250,000 home actually costs $500,000 or more by they time you pay it off.
Thankfully, there is a way to pay off your mortgage in approximately ½ the time. And the best part is it doesn’t cost extra money and it’s simple.
Here’s what you do: pay your monthly mortgage payment, then pay next month’s principal payment early.
For example, if your mortgage is $1500 per month, the principal may account for $400 of that payment (the rest is interest, taxes, mortgage insurance, etc.). If this is the case, you would pay $1500 for the monthly payment, then pay $400 for next month’s mortgage.
All you’re doing is paying next month’s principal a few weeks early.
The beauty of this system is the $400 is paid interest free. And, again, you’re not paying more money; you’re just paying part of your mortgage early.
Analyses demonstrate that this method cuts approximately fifteen years off a conventional thirty-year mortgage.
So, if you’re like me and you want to save money and not pay monstrous interest payments on your home, paying next month’s mortgage a few weeks early is a pretty enticing option.
P.S.: Another way you could got about paying off a home in fifteen years is to refinance your current loan to a fifteen-year loan. Interest rates on these loans are lower than on a conventional thirty-year loan, although standard monthly payments are (obviously) a bit higher.
P.P.S.: Hat tip to Tony Robbins and his book Money: Mastering the Game, pages 253-255, for this tip.
P.P.P.S: For more tips on how to succeed with money in divorce, click here, and here.