If you have a savings account, you’re probably making less than 1% interest and you’re paying income taxes on it. Barely pennies on the dollar. However, if you decide to put that money towards your house payment, that little extra can save you more than you’d earn in your savings account, you’d be earning at the mortgage interest rate. Just adding that little extra to your principal contributions to your mortgage payment can shorten your term, build equity and save on the interest.
For example, say you have a 30 year term mortgage for $175,000 at 4% interest rate. If you contribute just $100 more, you’d be saving 5 1/2 years on your mortgage term, and more than $25,000 on interest. If you can find somewhere to shave off $100 from your monthly budget and reappropriate it towards your mortgage payment, you could be really saving a lot in the long run. Let's face it, these days $100 doesn’t get you a lot, but $25,000 adds up to a college fund or a new car.
Improve the investment in your home by reducing its cost. Becoming debt free is an admirable goal for any homeowner and putting your money to work for you is a good decision you can take to the bank!