00:00Making extra mortgage payments could be the smartest move you make as a homeowner.
00:05If you own a home, you're probably used to watching a big part of your paycheck disappear.
00:10Every month for your mortgage, but what if adding just a little more could save you tens of
00:15thousands of dollars and cut years off your loan?
00:18That's not a trick.
00:20That's exactly what happens when homeowners make extra mortgage payments and you don't
00:24need a big salary.
00:25Or a finance degree to make it work.
00:27Each mortgage payment goes partly toward.
00:30What you owe and partly toward the interest the bank charges you early on.
00:35Most of your payment goes to interest.
00:37Here's an example.
00:38A $360.000.
00:40$60,000 mortgage at 6.25% has a monthly payment around $2,200.
00:45If you make just one extra payment of that amount toward your principal,
00:50you could cut about five years off your 30-year loan and save tens of thousands in interest
00:55according to Treadstone Mortgage.
00:57Paying a whole extra mortgage payment might sound important.
01:00But breaking it up makes it doable.
01:03Instead of $2,200,
01:05all at once at about $185 extra per month.
01:08The result is the same.
01:10Just easier on your budget.
01:12You can also use tax refunds, bonuses,
01:15or extra income to make one additional payment each year.
01:19Every dollar you
01:20you put toward your principal helps you get debt-free faster.
01:23If you've got a little extra...
01:25There are a few ways to speed things up even more.
01:28You could make a lump sum payment...
01:30Directly toward your principal.
01:31Just be sure to call your lender so it's applied correctly.
01:35Another option is to switch to bi-weekly payments.
01:38By making half a payment every...
01:40Every two weeks, you'll end up with 26 half payments.
01:43That's one extra full payment each year.
01:45And if you've made a big principal payment,
01:48you might be able to recast your mortgage.
01:50That means your lender recalculates your monthly bill
01:53based on your lower balance.
01:55Which can reduce your payment without changing your interest rate.
01:58Before sending extra money, confirm...
02:00With your lender that it goes to the principal.
02:02Some servicers apply extra funds as early payment...
02:05And while paying down your mortgage is a safe, guaranteed way to save...
02:10It's not always the top priority.
02:12If you have high interest debt or still need an emergency...
02:15Fund, tackle those first.
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