I am refinancing to a 15-year mortgage from a 20-year. If I pay one extra monthly mortgage payment per year, how many years will this knock off the mortgage?
Making extra payments will cut down on the length of your mortgage and the amount of interest you pay over the life of the loan. The specifics depend on the size of your loan and your interest rate. To figure out your savings, plug your numbers into our How Advantageous are Extra Payments calculator.
For example, making one extra payment on a 15-year, $300,000 mortgage with a 5% interest rate breaks down to about $200 extra per month. If you pay $2,572 each month instead of the required $2,372, for example, you can cut the number of payments down from 180 to 161 (from 15 years to 13.4) and the total interest paid from $127,029 to $111,653. The higher the interest rate, the more you'll save by making extra payments.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But before you rush to make the extra payments, think about how else you could use the money. Interest rates are so low now -- especially since you've just refinanced to a 15-year mortgage -- that there may be better places to put the cash.
Paying down high-interest credit-card debt, for example, should be one of your first priorities -- the interest rate is probably a lot higher than what you're paying on your mortgage. Also make sure you have enough money in an emergency fund so you can avoid getting into debt if you have unexpected expenses. And be sure to contribute at least enough money to your 401(k) to receive your employer's match because that's a 100% return that you won't beat anywhere else.
To learn more about smart uses for the extra money, see Save or Pay Down Debt.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Credit Report Error? They All Mattercredit & debt Don't dismiss a minor error. It could be the sign of something more serious.
-
Insurance for a Learning Driverinsurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
-
529 Plans Aren’t Just for Kids529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
-
When to Transfer Ownership of a Custodial Accountsavings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
-
What Travel Insurance Covers When Planes Are Grounded
Travel Your travel insurance might help with some costs if your trip was delayed because of the recent grounding of Boeing 737 Max planes.
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
