If you buy a home, chances are good you're going to get a mortgage to do it. Getting a mortgage loan means you're committing to a monthly payment that could follow you around for decades. When faced with this big obligation, you may want to try to repay your debt sooner rather than later.
It can feel daunting to figure out how to pay off such a big sum of money ahead of schedule. But what if you just pay an extra $100 a month toward your loan? Would that make a difference? Here's what you need to know.
How much of an impact can $100 extra make on your mortgage payment?
Making an extra $100 monthly payment on your mortgage loan can have a surprisingly big impact on the time that it takes you to become debt-free.
Let's say you took out a 30-year mortgage at 6.5% for $300,000. If you made an extra $100 monthly mortgage payment from the start of the time that you borrowed, you would end up repaying your debt a whopping four years faster than if you did not make an extra payment. In the process, you would save yourself $60,995 in interest.
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An extra $100 per month can make a bigger impact than you might think with your loan because when you pay this additional sum every month, the entire amount goes toward bringing down your principal balance. Usually, a good portion of each regular monthly payment goes toward just reducing the interest that you owe. But any extra you send in can actually drop your balance. That lower balance in turn means you pay less interest the next month since you don't owe the bank quite as much money.
Where can you find an extra $100 to pay extra to your mortgage?
If you want to take advantage of the opportunity to pay off your home loan years sooner, there are several potential ways you can find an extra $100 monthly.
One option would be to pick up a side gig, like driving for Uber, selling products online, or launching a blog or podcast. Side hustlers earn an average of $483 monthly, so you could work just a few hours in the month to earn an extra $100 to repay your mortgage.
Another option would be to cut spending elsewhere. If you dine out four times a month and pay $50 per meal out, give up two of those meals and redirect the extra $100 to your mortgage. Or if you're paying for an expensive gym membership you don't use much, see if you can switch to a cheaper one or give it up altogether.
The key is to go through your budget, find a sustainable cut you can make and stick to, and redirect that cash toward your mortgage. When you become debt-free years earlier, you'll be glad you made the effort.
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