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Paying extra towards your loans now, goes a long way later!

by J. Money on Tuesday, May 12, 2009

Operation Pay Off MortgageThat’s the 100% truth my friends! The more you pay off now, the less you pay in interest later – It’s like kickin’ compound interest in its head and getting away with it. I’m certainly not the first to promote this concept, but it was about time I go on record and state it once and for all :)

As I’ve mentioned in previous net worth updates, we’d been talking about using the money leftover from our House Budget every month, and then applying it towards our 1st Mortgage principal. That way we could start knocking it away sooner than later, and it wouldn’t require any big change in our financial scheduling!

Plus we really wanted to get into the habit of paying extra every month while we’re in our “interest-only” payment period. In approx. 8 years we’ll be forced to pay more anyways, so why not get to it and start erasing some of that “good debt” as they say (which, in all honesty, isn’t all that “good” feeling right now – but we’ve already covered that one)

And what do ya know? I *finally* got off my a$ and started working on this. Yup, “Operation Pay Off Mortgage” is in full effect and it’s feeling great. We can even see the difference it’s making already! The one principal payment of $165 this month already lowered our future monthly payments by almost $1 :) So what, it’s only a dollar right? Yes, but it’s a dollar that you don’t have to pay EVERY SINGLE MONTH for the rest of your loan! Which, in our case, has 28 years left on it. That means a savings of $336 (336 months) w/out including the 6.875% interest that would have compounded on top of it.

The point is – A one time payment of $XXX dollars shaves off money for the REMAINDER of your loan.
So even if you went back to paying just the minimums, your initial savings are now already in effect :) Of course, we’re not stopping now. Nope, we’re gonna keep applying that extra money every month until we get that bastard down to zero. It’s not gonna be fun dropping that money every time, but it’s sure gonna be smart.


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