Understanding Mortgage Payments

Before you even put one penny towards paying down that mortgage early, you need to understand this one thing first. I'm Tyler, a former financial advisor and portfolio manager, and now I make financial content for free so that you don't have to pay for it.

1. Switch to Bi-Weekly Payments

Number one, you could switch your mortgage payments from monthly to bi-weekly. Now instead of 12 monthly payments, you're paying 26 half payments. For a $300,000 house with a 4.25% 30-year fixed rate mortgage, you'd save $45,000 in interest and cut 5 years off the life of the loan.

2. Additional 10% Payments

Number two, consider putting an additional 10% towards paying down your mortgage each month. This option would save you $50,000 in interest and also cut the loan by 5 years.

3. Additional 20% Payments

Number three, if you put an additional 20% towards paying that mortgage every single month, you'd save $80,000 in interest and reduce the loan term by 8 years.

4. Learn About Interest

But number four, take just 20 minutes today to teach yourself the difference between simple linear interest and compound interest. Understanding this concept is crucial; if you are really just looking for more money, you could invest any of the money saved from options 1, 2, or 3 into a low-cost index fund. Over the next 30 years, you could earn about 3 or 4 times what you'd save in interest.

If any of this is helpful, like and follow, and I'll keep trying to get you one step closer to where you need to be.

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