What Is The Effect Of Paying Extra Principal On Your Mortgage?

Save Thousands On Mortgage Interest Without Really Trying

When taking out a mortgage, most people don’t spend the time to calculate the total amount they would’ve paid in interest. It’s easy to save thousands of dollars over the life of your mortgage with as little as $100 a month extra towards the principle.

We’ve been following Dave Ramsey’s Baby Steps plan since early on in our marriage but only recently have been more focused.  Having a baby will do that to you. We now have the responsibility of raising a human. Both of our priorities immediately shifted to providing a secure future.  

Currently, we are focusing on Baby Step 6 which is paying off our home mortgage. While some may argue that it’s better to leverage the low-interest rate of a mortgage in order to put more into the stock market, we’d prefer to have our house paid first.  

This would then free up a lot more in the budget to allow us to put larger amounts into mutual funds. We’d also feel freer to travel and do upgrades to the home.

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Get Motivated To Have No Mortgage

Instead of being intimidated by our mortgage amount I decided to take it on as a challenge. In order to get myself motivated, I started looking at amortization calculators.  

These calculators can be found online. I used this one.  I spent a half-hour playing with it and was disgusted with how much in interest we’d pay by the end of 30 years. Almost enough to buy a second house!  

I wanted to see what would happen if we paid $100 a month extra towards the principal. For the cost of a few coffees or lunches a week, we could save almost $24,000 in interest.

effect of paying extra hundred towards mortgage principle chart
Paying $100 extra every month will save almost $24k in interest. Makes you rethink blowing $10 here and there for coffees and lunches.

Gather Any Extra Money You Can Find

If we put $500 a month extra towards the mortgage, we’d save almost $65,000 in interest and be done in half the time.

Effect of paying an extra 500 a month towards mortgage principle chart
Cutting our interest and mortgage length in half when we put $500 extra a month.

Related: Earn $500 a month with my stay-at-home mom friendly side hustle.

Lump-Sum Payments Make A Big Difference

During the first years, less than half of the payments are going towards the principle, the rest is interest calculated off of the total balance of the mortgage. If the principal is reduced by a larger chunk during this time frame then there’s a lot less interest to be paid.

Interest vs principle payments the first year of your mortgage table
The interest paid is more than the principal!

We decided that any extra money that came in would go directly towards the mortgage principal. This means that our tax refunds and any raises/bonuses have an allocation until the mortgage is paid off completely.

effect of pay lump sump amounts towards mortgage principle chart
A yearly additional payment of $1500 made up of our tax return and any bonus.

Make Paying Off Debt Fun

Telling people you’re paying off your mortgage will get you some looks. We don’t broadcast our finances but one side of our fridge is dedicated to the goals we’re currently working on.

When we have friends and family over it’s hard for them to miss our motivational quotes, photos, and colorful mortgage payoff chart. I’ve even noticed a few friends quickly glance at our chart at a later date to see how much progress we’ve made.

It has opened up a few interesting conversations with our friends and family. Some of them think we’re unrealistic, others think we should keep the mortgage and invest more instead, and some even want to learn more.

If broke people are making fun of your financial plan, you’re on the right track.

Dave Ramsey

Finding Support To Stay Motivated

Having a supportive community around us has been key. Thankfully we have a few people in our lives we can share our successes and setbacks.

There are also many Facebook groups covering this topic. On Instagram, I search #debtfreecommunity in order to find other like-minded people.

Let me know in the comments if you are paying off your house early. Why or why not?

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Steffa Mantilla

Certified Financial Education Instructor

Steffa is a Certified Financial Education Instructor (CFEI) and the founder behind Money Tamer. Her 12-year background in operant conditioning and positive behavioral change training is used to help people find effective motivators to change their harmful money behaviors. Steffa explains the reasons “why” behind people’s financial behaviors and how to successfully change them. After paying off over $80,000 in debt through budgeting, she now teaches families how to get their own finances in order. You can learn more about her here.

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Early Mortgage Payoff Savings

1 thought on “What Is The Effect Of Paying Extra Principal On Your Mortgage?”

  1. Benjamin D. Lampson

    Excellent article and I agree 100% with every point made in it.
    I pay an extra $500 and will knock my 30-year mortgage in half, and be done in another 8 years.
    Good luck to you both.

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