When some people tell you how to start making extra mortgage payments, they make it sound like a big deal that you have to formally set up with your mortgage company. But that isn't true. Making extra mortgage payments can save you thousands upon thousands of dollars in interest payments. You can easily pay off your mortgage early, and for much less than you would otherwise pay. Follow these very simple steps to come out way ahead on your house payment schedule.
- Look at your amortization schedule. This lists all the payments that you are scheduled to make for the life of the mortgage loan. Notice the columns that are labeled "Principle" and "Interest" next to each payment number.
- To make an extra mortgage payment, simply pay the amount that is scheduled, plus the amount of principal listed next to the following payment on the list. You have just made two monthly payments in one month, and it only cost you a fraction of what it would have if you had waited until the following month to make the payment.
- When you send in your payment, make a note on the check. List it as "Payment for January, plus extra principal payment of $______." Fill in the extra amount you paid.
- Always refer to the amortization schedule, because the principal amount changes each month. Mark the payments you have made. Write the date when you sent them right on the printed schedule .
- Keep a record of all checks you have sent in. If there is ever a question of how much you paid and when, you will have complete records to prove how much you have paid.
You can pay off your home in half the time it would have taken, and save half the interest you would have paid by making an extra payment every month. You can make more than one extra mortgage principal payments if you include the principal for more than one month. Make sure you pay the correct amount. You can make as few or as many extra mortgage payments as you want. You do not have to do it every month.
Before following this plan, call your mortgage company to make sure there is no prepayment penalty on your loan. Also, verify the address and exact procedure to start making extra mortgage payments.