Method 1: $100 Per Month Extra on Your Loan. 7 Ways To Pay Your House Off Fast
Coming up next, we’re diving into the art of lightning-fast mortgage payoff. We have got a treasure trove of seven methods that’ll have you sprinting towards mortgage freedom. So, stay tuned, because your path to financial liberation is about to get a whole lot shorter!
Have you heard people say that by putting an extra $100 on your mortgage every month, you could wipe off five years from your 25-year loan? You might think that this sounds a bit far-fetched, but it works! Here’s how:
Your monthly repayment is made up of two elements:
The principal, which pays down the debt; and
The interest, which is dead money that goes to the bank.
It’s the principle that pays off the loan!
So if you have a monthly repayment of $2,500 per month, $2,000 of that may be interest and the other $500 is the principal. If you increase your repayment by $100 per month, it may seem insignificant against the $2,500 repayment. However, it’s actually $100 of PRINCIPAL on top of the $500 (not the full $2,500).
That’s a 20% increase in the speed at which your mortgage will be paid off! Hence, you’ll shave five years off your 25-year loan. In addition, consider the compounding effect of the interest. By paying off the loan faster, you’ll be decreasing the debt and therefore the interest charge, meaning more of your repayment will be added to your principal over time. Powerful stuff!
Now, of course, a $2,500 repayment would be for a pretty modest mortgage. So you may need to scale that up a bit if your mortgage payment is much larger. And indeed if you want to smash that mortgage faster.
The key realisation here is that it doesn’t take much extra to make it go faster. It’s relative to the principal element of your payment, not the whole principal & interest amount. So there you have it! If your goal is simply to pay off the loan you have, increase your principal repayment as much as you can. You’ll be very surprised at the results.
If you want to work out how much principal versus interest you’re paying now, just go to your loan statement and subtract the monthly interest charge from the monthly payment. Whatever is left over is your principal amount. So if that’s $500, up your repayment by $100 per month. If it’s $1,000, then up it by $200 per month. The more the better, of course.
If you want to learn more tips and tricks, join my next webinar.
Stay tuned for the next six methods. Yes there are six more! Imagine how fast you’ll do it if you apply all seven.
– Integrity Team