As the New Year begins, it’s an opportune time to set financial resolutions that are manageable and can lead to long-term benefits. One achievable goal to consider is paying a little extra on your mortgage each month. By starting small and gradually increasing the amount, you can make significant progress toward financial security. This article explores the potential benefits of this approach and offers practical suggestions for finding the extra money needed.
The Impact of Small Additional Payments:
Even a modest increase in your monthly mortgage payment can yield substantial benefits in the long run. Let’s consider a few examples:
You have a 30-year mortgage of $150,000 with a three percent interest rate. By paying an additional $100 each month, you could save $17,214 in total and pay off the mortgage six years early. Even an extra $50 per month would save you $9,719 and shorten the repayment period by three years and four months.
Suppose you have a 20-year mortgage of $100,000 at a four percent interest rate. Adding $50 to your monthly payment would reduce the loan term by 26 months, resulting in a savings of $5,563. Increasing the additional payment to $100 per month would save you $9,883 and enable you to pay off the mortgage three years and eleven months early.
By making a modest sacrifice each month to pay a little extra on your mortgage, you can accumulate substantial savings over time and gain financial freedom sooner.
Finding the Extra Money:
Now, the question arises: where can you find an additional $50-$100 each month? Here are some practical suggestions to help you:
1. Automate the Additional Payment: Set up an automatic transfer from your paycheck or bank account to cover the extra mortgage payment. By making it automatic, you won’t have to worry about remembering to make the payment manually.
2. Cut Back on Non-Essential Expenses: Review your spending habits and identify areas where you can save money. Consider reducing or eliminating non-essential expenses, such as buying lottery tickets, eating out less frequently, or bringing your own lunch to work. Small adjustments can add up to significant savings over time.
3. Brew Your Own Coffee: Instead of stopping at a coffee shop on your way to work, invest in a good coffee maker and prepare your coffee at home. This simple change can save you a considerable amount of money each month.
Making a commitment to pay a little extra on your mortgage each month is a manageable and impactful financial resolution. The examples provided demonstrate how even modest additional payments can result in substantial savings and earlier mortgage payoff. By automating the extra payment and finding small ways to save, you can create a more secure financial future. Remember, starting small and building on your success is the key to achieving your financial goals.