Yes. Moreover, the sooner you pay off your mortgage, the more cash you save for yourself as never-charged interest. The most reliable way to achieve such a spectacular result is extra payments towards the principal. A mere $20 on top of your regular monthly payment can result in roughly $24,000 of interest savings! The idea is that your extra payments reduce the principal faster, the amount charged as the interest on the principal shrinks, too. You are free from your mortgage debt sooner and the total amount of cash paid towards the interest is considerably lower. How much sooner and how much lower depends on how much extra you are ready to pay every (or not every) month. If you are not sure you are disciplined enough to make regular extra payments yourself, you may consider a bi-weekly mortgage repayment plan as an alternative.

A very sophisticated, but quite an effective method to accelerate certain types of mortgages is a so-thought Australian ingenious invention called simply “Mortgage Acceleration”. The concept involves an interest only loan and a Home Equity Line of Credit (HELOC). It is not simple and the whole procedure has to be very well thought over and balanced to suit every particular situation. I am fighting the temptation to explain here how it works, because I want to make sure you consult a professional in person to work out all the details.

 It’s amazing how surprised people usually are to find out how much an extra $20 payment may save them on their loan in the long run. For example, a $100,000 30-year mortgage bearing 9 percent annual interest calls for monthly payments of $804.62. Suppose a borrower could afford to increase the payment amount by $20 to $824.62, and the lender does not charge prepayment penalties. By making the larger payment each month, the borrower would save $24,135.56. No, you didn’t misread the amount. An extra $20 a month results in roughly $24,000 of interest savings!

Here is our little manual on how to work your own miracle.

First of all, the topic you absolutely must discuss with your mortgage lender is the treatment of extra payments towards principal, because some lenders tend to include a penalty clause regarding extra principal payments in the mortgage. If your credit score is not particularly high, you will very likely have a mortgage loan with a higher-than-average interest rate, and you may be penalized if you try to make extra or early principal payments on the loan.

If your lender allows you to make extra payments - it is action time! Read the rest of this article »