Paying off your mortgage faster doesn’t have to include crazy schemes or huge extra payments. In fact, it can be very simple.
We are paying off our mortgage faster and saving thousands in interest by using two simple techniques.
Today I’m breaking down our monthly mortgage statement to show you how much we pay per month toward our mortgage, how much we’ve paid off in the first three years of owning our home, and the 2 ways we speed up our mortgage payoff every month.
A monthly mortgage statement provides essential information about your monthly payments and your mortgage balance. It’s the key to seeing your mortgage payoff progress.
If you aren’t taking the time to open up your statement each month and see where the money is going, you should do that this month! Take a look at where your money is allocated and see how much is actually going toward your mortgage balance principal. If you bought your house recently then it probably isn’t much!
Our Monthly Mortgage Statement
In the video above I break down what exactly we pay each month toward our mortgage according to our mortgage statement.
Our monthly payment is $1,128.36 which is broken down as:
- Principal – $273.96
- Interest – $426.52
- Escrow – $427.88
Because we round up to $1,200 for our monthly payment, we also send $71.64 to principal payments each month. This is one of the ways we are paying off our mortgage faster.
That means each currently $273.96 + $71.64 for a total of $345.60 goes towards our mortgage principal each month.
Escrow is the part of the mortgage payment that handles paying for mortgage-related items. These expenses are necessary with a mortgage and include things like property taxes and homeowners insurance. These things are only usually due once a year but most mortgage companies require you pay monthly installments to make the large yearly payment. It’s like a sinking fund that the mortgage holds for you in an escrow account. The mortgage lender makes sure these expenses are paid by paying them our of your escrow funds.
2 Ways To Pay Off The Mortgage Faster
We’re paying off our mortgage with zero extra effort or pain thanks to a couple small decisions.
1. Rounding up our payment.
Our mortgage payment is $1,128 a month but we made the decision to round up to $1,200 for our payment. This means each month roughly $71 is going directly to pay down the principal of the mortgage. Rounding up doesn’t hurt our budget overall but it guarantees each month we are sending extra money to pay off our mortgage.
That doesn’t sound like much when we are throwing $71 a month at a $141,000 debt. but when you multiple that $71 by 12 months, we send $852 a year to the principal of the mortgage. That will definitely speed up the payoff process!
Rounding up your mortgage payment to the nearest $100 dollar amount makes it an easy and painless way to quickly pay off your mortgage faster.
2. Biweekly mortgage payments.
We’ve set up our mortgage with biweekly payments to pay off our mortgage faster. This pays off the mortgage faster because you are actually making 26 payments a year but you only need to make 24 to cover the 12 months of mortgage payments. That means the extra 2 biweekly payments are applied to the principal as one FULL PAYMENT extra per year.
On our biweekly schedule we have a “half payment” of $600 go fully toward principal around May and then again later in the year. This adds up to one full payment going straight to paying the mortgage down faster.
Most mortgage servicing companies allow you to set up a biweekly payment plan where you have an extra payment per year which drastically speeds up your repayment of your mortgage.
Those are a couple of the ways we are paying off our mortgage faster and how much we’ve paid so far!
How Much We’ve Paid Off In 3 Years
In the roughly 3 years since we bought our house we’ve made a lot of payments, but have we made any progress paying down our mortgage?
Mortgages are set up so you pay more interest in the beginning so a large chunk of each mortgage payment goes toward interest. Despite this we have managed to pay off thousands from our mortgage so far.
- Home purchase price: $158,900.00
- Mortgage start: $153,596.00
- Mortgage current: $141,194.46
- Mortgaged reduced: $12,401.54
In the video below you can see how we’ve paid off more toward our mortgage by the mortgage payoff strategies.
Paying off a little bit extra each month moves us much further down the schedule of debt to pay. By utilizing these small mortgage payoff strategies we are drastically speeding up our mortgage payoff without feeling any pain!
We made a few mistakes buying our first home so we are making up for it by easily paying off our house faster.
Should You Pay Off Your Mortgage Faster?
Depending on which financial advisor you ask, paying off your mortgage is a good idea or a bad idea. Arguments can be made for both options.
In reality it depends on your financial goals and your risk tolerance level. Many people find that paying off the mortgage brings a huge amount of relief and peace of mind when you don’t have a monthly mortgage payment. The security of owning a home outright can be a huge positive for many people.
Paying off your mortgage also saves you money. You’ll save a ton in interest even with a small interest rate because the faster you pay off your mortgage the less interest you will pay on the loan.
Having your mortgage paid off also gives you more options. You’ll have extra money each month that you could use to save toward retirement or go on vacations or build wealth and achieve financial independence! Paying off your mortgage early is an amazing way to build your wealth and gain financial independence.
In the end, paying off your mortgage gives you more options and more freedom. Who doesn’t want that?