When you bought your home, you (hopefully) qualified for a mortgage that you could afford and if you stay on top of it monthly, you’ll own your home free and clear in 30 years (or less, depending on your loan terms.) Making extra payments may not even have crossed your mind, but there are actually plenty of reasons why you might want to scrape together just a little bit more to throw at your mortgage each year.
Build Equity Faster
Save on Interest
Be Out of Debt Earlier
While it might sound daunting to come up with an extra payment every year, there are several ways to do it that make it more manageable. You could save up a little money throughout the year, or you could take an annual bonus or your tax return money and make a one-time principal-only lump sum payment. Another option is to divide your monthly mortgage bill by 12 and add that amount to each payment that year.
And finally, you could switch your payments to a bi-weekly schedule. You divide your monthly payment in half and contribute that amount to your lender every two weeks. By the end of the year, that schedule will have added up to one full additional mortgage payment and you likely will not even have felt it in your budget.
The great thing about all these options is that if you ever hit a financial rough spot, you can simply pull back on contributing any extra money without any penalties. You can then use that money for your immediate needs and get back into saving and adding extra mortgage payments when the issues get resolved.
