The idea behind accelerated mortgage repayment methods is the same for any debt reduction.Â By paying down the balance faster than the minimum allowed by the terms and conditions of the loan, you’ll be saving money on interest.
DINKs Finance weighs in with a number of tips for saving money on your mortgage. Â Three of them involve some kind of mortgage acceleration.Â I’ll add a fourth.
- Make a yearly prepayment on your mortgage.Â Instead of making twelve on-time payments, make one that covers twelve payments at once.Â The advantage of doing it this way is that the balance will be knocked down from the offset, which means the interest will accrue on a smaller balance for the year.Â This method is useful if you have a financial windfall like an inheritance or a year-end bonus that you want to use wisely.
- Make double mortgage payments.Â Instead of paying your minimum of $850, pay $1,700.Â The balance on the mortgage will go down like gangbusters.
- Make biweekly mortgage payments.Â Pay half of your monthly mortgage payment every two weeks.Â This is a good way to sneak in an extra payment (or payment and a half) each year.Â The additional amount is hardly missed.
- Round your mortgage payment up to the nearest $100.Â This is what we’re doing on our mortgages now.Â Instead of, say, $779.51, we pay $800.Â Instead of $1,078.12, we pay $1,100.Â It makes the math a bit easier when estimating outflows, and it pays down the mortgage a bit faster each month with a little extra principal being taken off the top.