By paying an extra $100 a month toward the principal on a $150,000, 30-year mortgage with a fixed interest rate of 6.5 percent, you’ll save more than $51,000 in interest and be able to retire your mortgage nearly seven years early. An extra monthly payment of even $20 or $25 can make a surprising difference. Granted, you’d stand to benefit more if you could invest that extra payment in an interest-bearing account offering a guaranteed higher rate of return than your mortgage rate. And paying off your mortgage early means you won’t have the tax benefits of home ownership for the same number of years. But if you’re after the psychological benefit of owning your home outright and spending far less on interest over time, then the extra-payment approach is the way to go.
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