Like to save money?
We thought so! And here’s a way to save big that you might not know about: pay a little extra on your mortgage each year.
In fact, if you make just ONE extra mortgage payment every year, you’ll cut years and, potentially, tens of thousands of dollars, off your loan. (It’s true! Just check out pages 56 and 57 of your Red Shoes handbook for an example of how this works).
How can you “find” the extra cash to make this happen?
Ok, making an extra payment sounds easy. But where is that extra money going to come from?
Here’s what Summit Credit Union mortgage loan officer extraordinaire, Debbie Olson, has to say on the subject.
“People don’t realize how little it can take to knock years off your loan. Set a goal of saving 1/12 of your mortgage payment every month. Make small changes like bringing in a bag lunch or not buying that daily latte—that money adds up quickly. Or maybe you can cut cable or get a better deal on your phone provider. Before you know it, poof, you’ll have money you need.”
Another easy way to make that extra payment? “If you get a raise at work, funnel some of it into your mortgage payment,” Olson recommended. “Do this right away and you won’t even miss it.”
You can also set up an automatic payment right out of your paychecks, again, with the idea that you don’t miss what you don’t see! (Kind of like putting the cookies into the cupboard!). But, be sure to make sure it’s earmarked as a principal payment (see below!).
“Just come in and talk to your mortgage lender,” Olson urged. “We’ll walk through your budget and help you find the option that makes sense for you.”
Make sure your extra money goes to PRINCIPAL
Before you start putting that extra money in savings, contact your mortgage loan officer and ask them to apply your extra payments to your principal balance. This is critical. It will not happen automatically just because there’s extra money in your account.
What if you find yourself strapped for cash some month?
Because the extra payment is just that—extra—you never have to make it. And you can always pay a little less one month and a little more another. The important thing is that you make at least the equivalent of one extra payment over the course of any given year.
Sure, you might occasionally miss that latte or lunch out—but think of the long-term benefits of paying off your mortgage faster! Your million is out there and this is a great step to help you get there!
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