Here is an easier way to pay off your mortgage faster…

In 2020, 45% of my mortgage payment applied to interest, and the remaining 55% was applied to principal. However, in 2021, I turned that number around SIGNIFICANTLY to reflect 83% of my mortgage payment going toward the principal and only 18% going to interest.

2020: 45% interest/ 55% principal

2021: 17% interest/ 83% principal

…talk about making your money work for you!!!!

How do you ask?  

I started making a few easy changes and you can too…

Round Your Payments Up: Rounding up to the next highest $10 or $100 amount can significantly help reduce the term of your mortgage by putting those small amounts towards the principal. 

Make Biweekly Mortgage Payments: There are 52 weeks in a year and 26 biweekly periods. That is the same as making 13 regular monthly payments. As it turns out, that one extra payment per year can add up – a lot. Biweekly mortgage payments will allow you to make one full mortgage payment directly towards the principal. You will be reducing the amount of interest you will have to pay over the life of the loan. 

Set a goal for your mortgage:  I knew at this time last year that I wanted the balance on my mortgage to be a certain amount by the end of the year.  To accomplish this goal, anytime time I received “extra” money (i.e. tax returns or unexpected income) I always made sure a great portion went toward my yearly money goal.  That is in addition to all of the money I saved doing the #SMCmoneychallenge, of course.

Get to Know Your Amortization Schedule:  I have never pulled up my mortgage amortization schedule more than I did this year.  It was important to me to know the exact number/percent of my mortgage payment was being applied to my payment AND then make sure that any extra money I applied to the principal was always MORE than what was being applied to the interest.

Many people get caught up in waiting until they have saved a large lump sum before many any type of move towards their goals.  I am proof that if you apply what you can afford, be it an extra $5, $500, or $5000 because even a small step is still a step in the right direction when it comes to goals.

How Much is Student Loan Interest Really Costing You?

The rising student loan debt is one of the greatest financial problems plaguing millennials, especially millennial women.  As of 2014, women account for 55 % of students enrolled in four-year colleges in the United States, according to the Federal Education Department and the figures continue to lean in favor of higher educated women.  With the average student loan debt at a little over $30,000 and growing, how are we ever going to eliminate student loan debt at all? The answer lies first in understanding the numbers.

How To Calculate Your Real Student Loan Interest from Top Millennial Finance Blogger, Danielle YB Vason of She Makes Cents

By definition, a loan is something that is borrowed that is expected to be paid back with interest.  The operative word in that definition is “interest”.  When you borrowed money from the government or your loan provider, you were given this money with the expectation that they will get their money back from you.  In fact, they expect you to take your take, defer, and get off track because their business is in the interest and not the actual repayment of the original loan.  Let me say that again for you.  They make their money on the interest because you are expected to pay back what you originally borrowed.  Student loan interest accrues daily once you are in your repayment period, which usually begins 6 months after your graduation date.  So what does that mean exactly?

How Does Student Loan Interest Add Up?

I will use my student loan numbers to help you visualize why interest will keep you in debt if you don’t start to get aggressive.  The exact math on this chilling realization is why millennials have a record amount of debt and a lower amount of home ownership.  I have two loans that were consolidated for a collective original loan amount of $24,422.77 back in 2007.  As of today, I have paid $21,189.89, which means that if this were an interest-free loan, I would only be $3232.88 away from having the loan paid off completely.  However, because of interest, I still owe $16,738.90.    How’s that you ask? Well, in the 10 years that have had this loan, interest has accrued daily. If you have studied your loan, you will notice that your daily accrual rate will change over the life of the loan.  If you are paying down your debt, your daily rate will eventually reduce as a result of the reducing current balance.  However, if you are one of those out of sight out of mind people who knows you have student loan debt that you have ignored, paying a reduced payment when you really can afford to pay more, or continually delaying your payment period, your daily rate is increasing…well, daily.

How To Beat Your Student Loan Debt

Currently, my student loan interest in accumulating at $3.09 per day/ $1127.85 per year, which is the lowest it has ever been.  To beat the system, you must pay your debt down at a faster rate than it is growing.  At $3.09 per day/ $92.70 per month, my snowball must be more than the monthly interest to make a difference.  Now that you have seen my numbers, it is time to look at yours.  To calculate your daily interest rate you must have the following numbers ready: your current balance and your interest rate.How To Calculate Your Real Student Loan Interest from Top Millennial Finance Blogger, Danielle YB Vason of She Makes Cents

In the past two months, I have watched my current balance drop at a faster rate than usual. That is because I have started making my regular monthly payment as well as an extra payment of money saved from the 52 Week BINGO money challenge. I was motivated to get a little more aggressive with paying down this loan when I set a  micro goal for myself to have my loan under the $15,000 mark by the end of my birthday month (August).  Coming up with a plan to beat your student loan debt first starts with the numbers.  If you don’t already know your numbers, I urge you to look up your current balance and interest rate, calculate much your interest accrues daily,  and as soon as you can, start making an extra payment above your monthly interest rate to get your debt moving in the right direction.  Instead of focusing on just how much you have left to pay, pat yourself on the back for how far you have come on this debt journey.  You can do it!  You have to do it so you may as well do it as quickly as possible so you can put that money saved toward your next baby step toward financial freedom. - OOTD | Student Loan Interest