How Can I Pay Off My Mortgage Faster? Basic Concepts
A 30 year mortgage, if paid monthly, is about 60% paid off in 24 years. If the borrower makes one extra monthly payment per year on a 30 year mortgage, the entire mortgage is paid off in 24 years. That's six years of vacations, helping your children with college, or bolstering your retirement accounts.
To understand this, let's look at how your mortgage payment is determined. We'll use a $200,000 mortgage at 6.0% for our example.
To understand this, let's look at how your mortgage payment is determined. We'll use a $200,000 mortgage at 6.0% for our example.
- The monthly payment would be $1199.10.
- The interest payment is $200,000 * .06 = $12,000/ 12 months = $1000
- The principal payment would be $199. That's right. After one month you will have paid $1199.10 and your balance will have gone down $199.
- A lower principal balance = a lower amount of interest. Each month the amount of interest paid goes down and the amount of principal paid goes up.
- Anything extra
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