OWN A HOME?
HAVE A MORTGAGE?
WANT TO SAVE SOME $$$?

THEN THIS GUIDE IS FOR YOU!!

Hello!  I decided to write this short guide to save money on your mortgage because it has helped me save thousands of dollars in interest over the years. Hopefully, this information will help YOU too!

Let's start with a quick definition of some common mortgage terms:

• Principal: Amount of debt left on the loan, not including interest.
• Interest: Fee charged by your lender for borrowing $.
• Mortgage: A legal document that pledges property to the lender as security of payment.
• Amoritization: Gradual repayment of a mortgage by installments.
• Prepayment Penalty: Fee charged for early payment of debt.
• Mortgage Insurance: Fee paid to insure the mortgage when down payment is less than 20%.

Each of your mortgage payments is made up of: Principal, Interest, Mortgage Insurance (if applicable), & Real Estate Property taxes (if you do not pay them yourself).

Principal is the amount of money you pay onto your mortgage, without interest. Interest is profit for the bank- your cost to borrow money from them.

Ok, so you have a mortgage, and you are familiar with mortgage terms, & are now thinking to yourself "How Can I SAVE some MONEY?"   It's simple- 2 words: PRINCIPAL PAYMENTS.

Making 1 extra Principal payment per month can save you Thousands of Dollars!! 

Here's an example:

Loan Amount: $200,000

Interest Rate: 6%

Term: 30 yr Fixed

Monthly payment is approx. $1,200.00

Over the coarse of that loan, you will have paid over $231,000++ in INTEREST!.  This is in Addition to your original Mortgage Loan Amount.

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Lets say you make 1 Principal Payment per month:

Monthly Payment ($1,200.00 same as above) + 1 Principal Payment.

Over the coarse of that loan, the amount of Interest Paid drops to $151,000.

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Lets say you have $500 extra per month you can put towards the Principal...

Total Interest Paid drops to $102,000 & cuts the term of the loan in 1/2! Instead of paying for 30 years, that loan will be paid off in 15!

Making Principal Payments is like paying yourself. I think it is one of the BEST ways to SAVE $$. I've found that making money 'disappear' into your mortgage is a way to guarantee that I will not be tempted to spend it later on. Unlike a savings account, where I have access to it at almost anytime, putting the money down on the mortgage insures that it will not be spent foolishly.  And you don't have to have loads of money to put down each month to make a difference. Maybe you get a Christmas Bonus, or a raise. (I know, these days, raises seem hard to come by, but maybe your boss is feeling extra generous this year). You don't have to make specific principal amount payments, they can be made in any dollar amount. 

Tip:  I have found the easiest way to keep track of your payments & balance by using an amortization schedule.

What is an Amortization Schedule?

Basically, its a breakdown of the principal & interest payments on your loan. It shows how much of your monthly payment goes toward Principal (paying down your loan) & interest (money down the drain). 

It will look something like this:

Month                      Interest              Principal                   Balance

Jan                            $1,000.00        $199.10                     $199,800.90

Feb                            $ 999.00        $200.10                      $199,600.80

March                        $998.00         $201.10                     $199,399.70

April                           $997.00        $202.10                       $199,197.60

etc... etc.... thru the balance of the loan  (for a 30 yr loan, you will have 360 lines).

As you can see, the highest amount of interest is paid in the beginning of the loan. For each $1,200.00 payment you make (in the example above), less than $200 gets put toward your $200k debt, the rest is all interest. Profit for the bank to loan you the money.

By using the Amortization schedule, I can see exactly what my balance is, and how much goes toward principal/ how much to interest. I make my principal payments according to the amortization schedule. I pay the amount of principal listed in each line. Example above:  If I wanted to make 1 principal payment according to my schedule above, I would write my lender a check for $199.10, then cross off the line. I just saved myself $1,000.00! Then when my next mortgage payment was due, I would pay my usual monthly payment of $1,200.00, then cross off the Feb line. With that mortgage payment, $999.00/ $1200.00 went toward interest, as only $200.10 went toward my loan. It's easy once you get the hang of it, and by doing it this way, you can keep track of everything easy to.

Here are some simple steps to get started:

1. Review your mortgage loan- specifically look for a 'prepayment penalty clause'.  Lenders sometimes will have buyers sign a prepayment penalty clause to offer a slightly lower rate. A prepayment penalty clause will only allow you to make a certain amount of principal payments. Be sure that your loan does not have this clause, because otherwise, if you pay more in principal than is stated on that clause, you can be penalized.
2. If you have any questions, contact your lender.
3. Print out a Mortage Amortization schedule. There are many sites online that offer free calculators & mortgage tools. Go to google, and search "mortgage amortization" or "amortization schedule".
4. You will need to know the following information: Original Loan Amount, Term, Interest rate.
5. Print out your amortization schedule in monthly format (showing each month, for the coarse of the loan).
6. If you are already into your loan, you will need to know your current principal balance. You can contact your lender for this info. This will be the starting spot on your schedule. Cross out all the lines above where your current balance is. If your loan is new, start with payment 1.
7. For Every payment you make, whether its a mortgage payment, or principal payment, you will cross thru a line. Don't worry if the months don't line up, they won't after you start paying down the loan. Helpful hint: at the end of each line, write the date paid & /or check #/transaction #. This helps you keep track.
8. You can pay your mortgage payment & principal payment at the same time, but I highly suggest you use 2 checks. On the one with the principal amount, write "APPLY to PRINCIPAL ONLY" in the notes section, along with your mortgage loan #. Remember, that if your mortgage is due, the 1st payment will be your mortgage, then the principal will be applied. Example above: lets say your next payment line is "March", but you want to make 1 principal payment. The March line will be your $1,200 payment, then you would use the $202.10 principal amount in the April line to make the principal payment, then cross off both lines.
9. Keep receipts & check your balance. I pay my mortgage at my bank, and there have been times the tellers have entered the principal amounts wrong. I was able to catch the error, because I work line by line on the sheet. This is another reason why using the amortization schedule & going line by line is helpful. 

If you would like to view how much you can save on your loan, search for one of the amortization schedules online & plug in some of your info.  Most lenders also have these type of calculators on their sites. It's fun to see how much you are saving! You will be surprised how much faster your loan balance will drop & how much money you will save! Why give it to your mortgage company?

I hope you enjoyed this review, & it will help you save $$! 

If you read thru it, & aren't completely asleep by now (LOL), could you please click "yes" below. This will let others know it was helpful! Thanks!!

:)