Paying Off Mortgage Early – 52-Week Money Challenge Style!



Over the years, I routinely have been asked what is the best way to pay down or pay off a mortgage. There is no real one answer to that question. Some make bi-monthly payments, while others add an extra sum to their monthly payments – applying that to the principal. Either way, just doing something will show you a savings in the end.

Recently, I had a conversation with a really nice lady about saving money. For those of you that know me, I am a big proponent of having at least a two month emergency fund (preferably a six month reserves of all your monthly payments, but two will work). After I explained the advantages of having a two month emergency fund, she asked how she could pay off her mortgage early with her husband’s hours being cut a little bit.

I thought about this for a few minutes then came up with this: A 52-week savings challenge. For those of you who do not know what the 52-week saving challenge is, I will explain. There are 52 weeks in the year. Starting on week one, you match whatever week it is in the year with a dollar amount. So on week one, you save $1 dollar. Week two, you save $2. Week three, you save $3, and so on… By the end of the year, you will now have saved $1,378. If both she and her husband do the 52 week challenge, they will have saved $2,756. Click here: 52 Week Money Challenge (Facebook Page).

52-Week Challenge

This savings can now be applied (after they have saved their two months emergency reserves) towards their mortgage principal. So let’s say that your current mortgage payment is $680/month with a current principal balance of $100,000. Taking the taxes and insurance out of the monthly payment will leave a P & I of around $500 to $540 on a typical 30-year fixed home loan – depending on your interest rate, ect.

Once you have this savings, you will repeat the 52-week challenge. In the meantime, you will take $114.83 (or $229.67 if you both completed the challenge) and add it above your monthly mortgage payment and apply it directly to the principal. Where did I come up with the $114.83? Divide your $1,378 savings by 12.

So what savings will you see? Just adding the $114.83 to the 30-year fixed mortgage (above scenario) will allow you to pay off your home loan 9 years and 5 months early and give you a savings of $32, 039.69. If you applied the $229.67, then you will cut 14 years and 2 months off your 30-year fixed rate mortgage and have an overall savings of $46,790.09.

Paying Off Mortgage Early

If you would like to run the numbers yourself, then there are a number of online calculators you can use. No preference, but I actually like the Dave Ramsey calculator. Click here to use: Dave Ramsey – Mortgage Calculator

Another strategy you can use is to also apply your yearly tax refund (if you get one) to your principal. This would also greatly reduce the amount of overall interest paid and shave a few years off your mortgage.

Again, there is no right way to pay off your mortgage. This is just one strategy to do it. If you like this article, then please feel free to leave a comment below… or Share, Tweet, or Like It… #52weekmoneychallenge

Tucson /S. Arizona: (520) 303-5620 Phoenix /N. Arizona (480) 648-1733

About the Author

Joseph Small (NMLS #380188, AZ LO-0919258) is a Sr. Loan Officer and Certified Military Housing Specialist at Guild Mortgage Company. With over 10 years in the mortgage banking industry, Joseph is here to help you with your home loan mortgage needs. You can also connect with Joseph on Twitter and on Google+.

Joseph Small and his Team at Guild Mortgage Co. helps Arizona Homeowners and Buyers with all their home mortgage loan needs. Give them a call today! Maybe one day you too will say, “Joe’s My Lender!”

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