People prepay their mortgages in a variety of ways, but one of the more popular methods is to pay a little extra on your loan each month, which over the life of the loan could save you thousands or even tens of thousands of dollars.
Let’s say you owe $100,000 on your 30-year loan at a 4 percent interest rate. If you paid the loan as scheduled, you’d end up paying the bank roughly $71,000 in interest. If, however, you added just $75 a month to your monthly payments, you would save more than $17,000 in interest and repay the loan more than 5 years faster.
Some people also make bi-weekly mortgage payments, which effectively leads to you making 13 months of mortgage payments in a year, compared with the traditional 12. Before you decide which method to choose, do the math to see which is most financially effective and which you think you can actually stick to.