How To Save Money On Your Mortgage Part II

When you sign up for a mortgage, be sure to ask for an amortization chart. You see, when you make a monthly mortgage payment, a portion of it goes into paying the interest and the remaining is channelled to repay the principal loan amount.

In the beginning of your mortgage, a big portion of your monthly repayment are set to pay for interest and only a small portion is allocated towards paying the principal. Your amortization chart will show you how much your monthly installment are divided for interest and principal payment.

For example, during the first few years, only about $60 out of your $1500 monthly payment is channelled towards paying the principal and the rest are used to cover interest. This amount will increase every year and towards the end of your mortgage, a significant part of your monthly installment will go to offset your principal and only a small portion goes to pay interest.

Here's how you can shorten your repayment period by half. Everytime you make payment each month, add the amount of principal payment for the next month into the payment. The point in repaying the loan lies in paying the principal, not interest. The sooner you settle the principal, the sooner the mortgage gets paid off. So instead of paying $1500 every month, you pay $1560 and you adjust this figure each year according to your amortization chart.

Every time you pay the principal amount in advance, your bank cannot charge you interest for that amount on that particular month. Use this method to accelerate your amortization and own your property in half the time with half the cost.

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