Sunday, September 6, 2015

What can paying an extra $2,000 a month towards your mortgage do?

I had been saving for a new-to-us truck for about 2 years now. We finally saved up enough money and bought the truck in July. Now that this financial goal has been completed, I wasn't really sure what to do next. Of course saving for our next big purchases came to mind. We would like to go on a nice vacation next year and get a few things around the house updated. I increased my 401(k) contribution from 10% to  20% (the max the company will allow). I thought about maybe putting some money into my Roth IRA, but  I had been getting a little frustrated seeing that huge mortgage balance on our mortgage statement. It had been getting smaller each month, but very, very slowly.  I just didn't seem to be going fast enough for me. So I figured I'd give it a little boost and put an extra $2,000 towards it this month. Just doing so knocked off 5 payments. Our regular payment is $1,017, so paying $2,000 now will mean we'll be paying $5,085 less later. I was going to change it back to $300 extra (which is what I had been doing the past couple months), when I opened my account I saw a link that showed me how view how extra payments could help pay off the mortgage faster. If I was to continue paying an extra $2,000 a month, this is what our mortgage (with a current balance of $158,813) would look like: 

(Click image for larger version)

Wow - we could be mortgage free by 2020 and knock off 177 payments (177 x $1017 = $180,009)!! I probably won't be able to continue to pay $2,000 a month (that's about what I take home after taxes), but after seeing this, I think I'll be paying an additional $2,000 for at least one more month.