Benefits of Mortgage Prepayment

Paying off a mortgage early can give us a feeling of accomplishment and relief. Dropping a large monthly payment can put us in a great position to save more and do more of the things we enjoy. It is a step to financial freedom!

Warning: Do not prepay a mortgage if you have other debts outstanding. This is the last step in the debt elimination process. I have had people as me how much they can really save so I put together this post!

Example:

30 Year Mortgage, $100,000 @ 6.00%

Normal payment: $599.56

Prepayment Examples (assuming you pay extra from day 1):

• Add $100 in principal each month: Paid off in 258 months (21.5 years) and save $39,896.57 in interest
• Add $200 in principal each month: Paid off in 197 months (16.42 years) and save $58,446.42 in interest
• Add $300 in principal each month: Paid off in 163 months (13.6 years) and save $69,460.99 in interest

As you can see adding as little as $100 per month can save you a lot of money. You also knock off 8.5 years of payments to boot. Prepaying a mortgage can help us get to our goals faster. If you have the free cash flow and no other debts or obligations I highly suggest you do this.

To calculate the above scenarios I used this free tool here. It is a little quirky but once you get the hang of it you will be able to play with the numbers and decide what is best for you!