A few days ago, I made my very first mortgage payment. It felt so good, today, when I logged on to our mortgage company’s website and saw that the payment has posted. It felt not-so-good to see just how much of our payment was applied to interest – and how little was applied to principal.
If I continue to make our mortgage payment, as scheduled, we’ll own our home in 15 years. Each month, as we slowly chip away, a little more will be applied to principal and a little less will be go towards interest. My goal? To speed up that process – so that I can pay off the mortgage in less than 15 years. Every extra dollar that I send will go directly towards the principal balance, build equity, and reduce total interest paid.
Towards that end, today I sent my first extra principal payment. When making extra payments towards any loan, I always like to write “apply to principal” in the memo-section of the check. In this case, I used online bill pay and instructed my bank to do the same.
The amount wasn’t much, but if I make an equal extra principal payment just once a year for the next 15 years, I will reduce the term of the loan by 5 months – and save over $2000 in interest! Not bad – and that’s if I only made one extra payment per year. Imagine the power of making an extra payment – each month! Debt reduction rocks!
Here’s a neat little mortgage payoff calculator from the folks over at Dinkytown. It’s simple, easy to use, and provides instant motivation. Check it out.