How to Pay Your Mortgage Faster

Any additional payment you make on your Mortgage (also called pre-payment) will save you a lot of money in interest. Every normal payment you make consists of Principal and interest. The interest portion of your payment is determined by the outstanding balance of your mortgage. As the outstanding balance diminishes, less of your payment goes towards interest and more comes off the balance.

 

 

Example – Principal vs. Interest

Mortgage balance	Rate		If the Payment is	=	Amount Applied to Principal	+	Amount Applied to Interest
$150,000	6.45%		$1,000	=	$205	+	$795
$100,000	6.45%		$1,000	=	$465	+	$535
$50,000	6.45%		$1,000	=	$730	+	$270

 

 

 

The faster you reduce the outstanding balance on your mortgage, the more you will save in interest charges. Since pre-payment policies vary between institutions and types of mortgages, you should consult your mortgage agreement to fully understand the pre-payment options that may be available to you. Some ways to minimize your mortgage costs are:

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