From the course: Finance and Accounting Tips

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Making extra payments

Making extra payments

From the course: Finance and Accounting Tips

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Making extra payments

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- I had a neighbor ask me if it was a good idea that she start including a little extra in her monthly mortgage payment. She had been told that that little extra could make a big difference in the end. What do you think? - Well, paying down debt early is almost always a good idea, so yes. If your neighbor has a little extra cash each month, then it is a good idea to apply the amount to reduce the mortgage. - Will that little extra make that big a difference? Let's look at a couple of examples. Suppose you just took out a $200,000 30 year mortgage with a 3.6% interest rate. Your monthly payment each month for the next 30 years would be $909.29. - That means that, in 360 months, your mortgage balance would be zero and you'll own your home free and clear. But let's suppose that in addition to the $909.29 each month, you round your payment up to an even 1,000. In other words, you start making $1,000 payments. What difference do you think that will make? - Well, if we run the numbers, it…

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