After you’ve made a down payment, paid for a home inspection and shelled out the various closing costs on a home purchase, your bank account will have taken a severe beating. All that’s left is paying off the mortgage loan — every month for the next 30 years.
On a $200,000 mortgage, for example, you will end up paying nearly $165,000 in interest on the loan over the course of 30 years.
The good news is that you can save a decent portion of those interest payments by adopting one or more of four simple strategies. The experts at Realtor.com have outlined these strategies that can help you pay off that mortgage more quickly — without going broke.
Make one extra payment a year. Most mortgages do not include a prepayment penalty, and making one extra payment a year cuts your repayment period by about four years.
Add a little extra to your monthly payment. Adding just $100 a month to a monthly payment could save you $27,000 over the life of a $200,000, 30-year mortgage and cut five years off your repayment period.
Refinance to a shorter-term loan. If your 30-year mortgage loan was made when interest rates were higher, consider refinancing to a 10-year or 15-year loan. The interest rate is considerably lower for these shorter terms, but the monthly payments will be higher. You’ll also have to pay those dreaded closing costs again.
Create your own amortization schedule. This strategy “mimics” the effect of refinancing from a long-term loan to one with a shorter term but you save the closing costs and don’t have to fuss with all the paperwork. You have to work this out with your lender, but if done successfully, you can cut your repayment period by 10 years or more.