How much time and money can you really save paying a little extra on the mortgage?
Additional Monthly Payment Time saved Interest Saved $30 1 year 2 months $13,458 $60 2 years 4 months $25,560 $150 5 years 2 months $55,605 $300 8 years 8 months $91,742 $500 12 years $124,385 $1,000 16 years 11 months $170,620 The first thing you’ll notice is that paying a little more each month saves you money over the long term.
With just $30 in additional principal payments a month, which most of us can afford and wouldn’t notice, you can save over a year of payments and $13,458 in interest.
Now, the most important thing to notice about this chart is that for every additional dollar put towards principal, you get less of a return than the previous dollar.
Looking at the $30 and $60 monthly payments, you can see that $60 a month does not give you twice the return of $30 a month.
The more you pay each month, the less benefit each additional dollar has on time saved.
$100 a Month Extra Payment Time Saved Total Interest Saved Years 1-5 1 year 2 months $17,025 Years 5-10 11 months $12,290 Years 10-15 8 months $8,304 Years 15-20 7 months $5,170 Years 20-25 5 months $2,708 Years 25-30 4 months $785 Each of the payment plans above is exactly the same.
For example, if you pay $100 more a month for the first five years of the loan, you will save 1 year 2 months of payments and $17,025 in interest.
If you did the same payment plan between years 25-30, you would only save 4 months and $785.
Let’s go a step further (not in the chart) and calculate the extra payments starting in year 10 and going until the loan is paid off (18 years and 1 month of payments).