Check this out… it’s one of my favorites!
If you do this with your 30 year mortgage, you’ll shave 5-7+ years off of your term and save five-figures of money that you’d otherwise pay towards interest. Jay and I have been doing this for years and we are far ahead of where we should be.
Here’s the math. Let’s say your minimum payment is $300
1. Multiply $300 by the goal of 13 months worth of payments ($3,900)
2. Divide $3,900 by the reality of 12 months (1 year) of payments ($325)
3. If you paid $325 per month instead of the minimum $300… you’d squeak out exactly 1 extra PRINCIPLE ONLY payment every year.
Is shaving years off of your loan term worth $25 per month? You decide…but it’s a no brained, mathematically.
If you can’t quite swing that, try rounding up your payment. If your payment is $236 per month, pay no less than $240, $245, or $250+ per month instead. You’ll still see your payoff date approach much quicker than if you did nothing.