PAYING OFF DEBT

The quickest way to pay off your home (don't we ALL desire to own a home and property free and clear?) is to pay extra Principal payments.

Take your Amortization Schedule.....if you do not have an amortization schedule contact your mortgage company or bank and request one......

I am going to list just a few lines of an amoritzation for demonstration purposes:

Due Date Principal Interest Balance
04/01/09 $284.52 $106.80 $19,432.49
05/01/09 286.06 105.26 19,146.43
06/01/09 287.61 103.71 18,858.82
07/01/09 289.17 102.15 18,569.65

(Sorry Blogger won't let me line up these figures. Hopefully you can follow the idea.)

When you make the April 1 payment include the next principal amount. This would make your payment $677.38 instead of $391.32 BUT you would save $105.26 in interest. Then on May 1 do the same thing: add $289.17 to the $391.32 - making a payment of $680.49 BUT you would save $102.15 and your accumulated savings on interest is now $207.41 AND you have cut two months off the term of your mortgage.

Granted this is easier to do at the beginning of a mortgage. For instance:

A 30 year loan for $100,000 @ 6% interest would have a payment of $599.56. The first interest would be only $99.56. In fact it would take you to the 222 payment (8 1/2years!! ) before you would be at an equal principal and interest of $299.77 & $299.79.

If you cannot do this each and every month just do it at often as you can. Even if you just make 2 or 3 extra principal payments a year. On a 30 year loan you have cut your mortgage from 30 years to 25 years and saved thousands of dollars of interest.

Another suggestion: if the added principal payments are too much for you to handle just add a set amount to each payment; i.e. $50 extra dollars a month. You will cut both the length of time to pay off the mortgage and the amount of interest you will pay greatly.

This technic can be used on any type of loan which has been written for a set rate, at a set amount of time, such as a car loan.

I have done this on every home we have ever bought. We have owned 7 homes during our 50 years of marriage. We assumed a loan on our current home in Coweta that had 25 years and 8 months left on the loan and would have been paid out on January 1, 2024. If I only pay the monthly payment and no extra going forward it will be paid in full on December 1, 2011. In other words I will have cut 13 years and 1 month off the mortgage and you can imagine the $'s we've saved in interest. Although it is more difficult for us to make extra principal payments now that we are both retired, I am able to do so from time to time and I hope to have it paid for in less time than the 2 years & 8 months remaining!!!!

As to any credit card debt you might have. You absolutely MUST make more than the minimum required amount or you will NEVER clear the debt. Just paying the minimum payment hardly touches the principal at all. That is what the credit card companies want you to do, but please don't fall for that trick.