Tips to Pay off Your Mortgage Sooner

With interest rates consistently staying at a low rate people often wonder if they can take advantage of the low rates and possibly pay off the loan sooner.

The answer to this question is for most circumstances a yes. On a $500,000 loan with an interest rate of 4% would equate to $20,000 a year in interest. Alternatively, the interest rate on the same loan amount with a 6% interest rate is $30,000. So if a mortgage holder deposited the same amount towards the home loan of $30,000 instead of $20,000 at an interest rate of 4%, in that single year the property would have paid off an additional $10,000 towards paying the mortgage off.

This $10,000 a year would pay the mortgage off much sooner. The principle required to pay off a $500,000 mortgage in 30 years averages out to $16,666. 5 years of repayments is $83,333. So 8 years of additional $10,000 towards a mortgage would pay the mortgage off 5 years before it was supposed to be paid off in. Furthermore, with the added value of compound interest since the principle is lower than what it would have been had no additional payments been made, the interest paid for the life of the loan would also be greatly reduced decreasing the time by even more.

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