What Is The Effect Of Paying Extra Principal On Your Mortgage?

When taking out a mortgage, most people don’t spend the time to calculate the total amount they would’ve paid in interest.

It’s easy to save thousands of dollars over the life of your mortgage with as little as $100 a month extra towards the principle.

We’ve been following Dave Ramsey’s Baby Steps plan since early on in our marriage but only recently have been more focused.  

Having a baby will do that to you. We now have the responsibility of raising a human. Both of our priorities immediately shifted to providing a secure future.  

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Save Thousands On Mortgage Interest Without Really Trying

Currently, we are focusing on Baby Step 6 which is paying off our home mortgage.

While some may argue that it’s better to leverage the low-interest rate of a mortgage in order to put more into the stock market, we’d prefer to have our house paid first.  

This would then free up a lot more in the budget to allow us to put larger amounts into mutual funds. We’d also feel freer to travel and do upgrades to the home.

Get Motivated To Have No Mortgage

Instead of being intimidated by our mortgage amount I decided to take it on as a challenge. In order to get myself motivated, I started looking at amortization calculators.  

These calculators can be found online. I spent a half-hour playing with one and was disgusted with how much in interest we’d pay by the end of 30 years. Almost enough to buy a second house!  

I wanted to see what would happen if we paid $100 a month extra towards the principal. For the cost of a few coffees or lunches a week, we could save almost $24,000 in interest.

Gather Any Extra Money You Can Find

If we put $500 a month extra towards the mortgage, we’d save almost $65,000 in interest and be done in half the time.

Related: Earn $500 a month with my stay-at-home mom friendly side hustle.

Lump-Sum Payments Make A Big Difference

During the first years, less than half of the payments are going towards the principle, the rest is interest calculated off of the total balance of the mortgage. If the principal is reduced by a larger chunk during this time frame then there’s a lot less interest to be paid.

We decided that any extra money that came in would go directly towards the mortgage principal. This means that our tax refunds and any raises/bonuses have an allocation until the mortgage is paid off completely.

Make Paying Off Debt Fun

Telling people you’re paying off your mortgage will get you some looks. We don’t broadcast our finances but one side of our fridge is dedicated to the goals we’re currently working on.

When we have friends and family over it’s hard for them to miss our motivational quotes, photos, and colorful mortgage payoff chart. I’ve even noticed a few friends quickly glance at our chart at a later date to see how much progress we’ve made.

It has opened up a few interesting conversations with our friends and family. Some of them think we’re unrealistic, others think we should keep the mortgage and invest more instead, and some even want to learn more.

If broke people are making fun of your financial plan, you’re on the right track.

Dave Ramsey

Finding Support To Stay Motivated

Having a supportive community around us has been key. Thankfully we have a few people in our lives we can share our successes and setbacks.

There are also many Facebook groups covering this topic. On Instagram, I search #debtfreecommunity in order to find other like-minded people.

Let me know in the comments if you are paying off your house early. Why or why not?

Related Articles:

• How to Pay Off Your Home in 5 Years
• What do you still have to pay after your mortgage is gone?
• Your Life After Your Mortgage Is Paid Off
• How to Pay A 30 Year Mortgage Off in 15 Years
• What Happens When You Pay Off Your Mortgage?