How to Pay Down the Principal With a 15-Year Mortgage
With the recent trends toward frugality and debt reduction, many borrowers are looking toward paying down their mortgage debts even faster than their current mortgage term. While the monthly payment for a 15-year mortgage is higher than a 30-year mortgage payment, the debt is reduced much faster and with less interest expense. A borrower can use a few other methods to pay their debt down even sooner than the 15-year term.
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Instructions
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1
Set up a bi-weekly mortgage payment plan. Over the course of a year, a borrower will pay 26 payments, which is the equivalent of 13 monthly payments in one year. This is an easy way to budget an extra monthly payment into your mortgage.
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2
Divide your monthly payment by 12. Add this 1/12th payment to your mortgage each month to equal an extra monthly payment per year. This is a good alternative to Step 1 if your lender charges you a fee for a bi-weekly payment, or does not allow one at all.
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3
Make extra lump sum payments on your mortgage as bonuses, commissions or extra funds become available. Every little bit helps, even if it is simply $100.
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4
Round up your mortgage payment to an even number and consider that number your monthly payment. This will help with budgeting and reduce your principal even more each month.
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Tips & Warnings
Always mark any extra mortgage payments as principal reduction payments to avoid the funds being placed toward future payments. This reduces the principal as opposed to simply paying the mortgage payment ahead of time.
Paying extra on your mortgage will not cause your monthly payment to go down, as it does with credit cards. Make sure you have at least two to three months' worth of monthly expenses saved up in the event of an unexpected expense, so you do not rely on debt to pay for those expenses.
