Wednesday, May 7, 2014

How I Plan to Pay Down My Mortgage Faster

My mortgage acceleration plan. Since I refinanced in October of 2006, only about $4,500 of my combined monthly payments have gone toward paying down my principal balance on my house. That means that on average, only about $250 out of each $1,500 mortgage payment goes toward the principal balance on my house. I've seen and read about a few different options for paying down your mortgage balance at an accelerated rate. There are programs that offer a software package, and there are other programs that just recommend to make additional principal payments whenever possible. In my journey to pay down my mortgage faster, I'm going to use the latter of the two options.

I read an article awhile back that said if you want to pay down your mortgage in half the time, all you have to do is send in a payment equal to double the principal each month. So lets take my latest payment for instance: On  April first, my payment amount was $1,791.57 - of this amount, $246.57 went to principal, $1,263.20 went to interest (a waste of money in my opinion) and $281.80 went toward my escrow account to pay for my property taxes. Let's say that I wanted to pay my mortgage down in half the time, then I would simply have to double the principal amount from $246.57 to $493.14, bringing my total monthly payment to $2,038.14. Really not that big of a difference. I could simply make up this amount by not going to lunch everyday - figure I spend on average $10/day on lunch over 20 days, there's $200 bucks right there. Almost the full amount that I need to make a double principal payment. Instead of changing my lifestyle though, I'm going to use the income generated from this blog (and some of my other online ventures) to make additional payments to principal.

To start this, I'm going to be sending in a large principal only payment in during the middle of June so that when my July payment is calculated, more of my payment goes toward principal since the interest owed will be calculated on a lower amount. During June, I plan to send in a principal payment in the amount of $2,500 + whatever other income I can pull from this blog during that time. The $2,500 is my 2007 tax return, and since I haven't blown it on anything stupid yet, I figure that I might as well put it to good use.

Stay tuned for updates on my personal mortgage acceleration program as I'll be creating posts once or twice each month detailing the benefits (and the perils) of putting extra money into my mortgage each month.

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