Our house has a fixed mortgage, and one of the reasons I went with that instead of an ARM was the greater flexibility in paying it off early. There are a bunch of options I’m kicking around currently, including…
- Sock some money away monthly in a savings account, CD or money market fund, let it accrue interest, and make a mad lump sum payment in 5 or 10 years
- Pay a small extra amount towards principal on each monthly payment
- Pay a larger lump sum amount towards principal at the beginning or end of each year
- Pay both the small monthly amount and the larger annual lump sum towards principal
To help me along, there’s a handy calculator to plug in different number scenarios: Advantages of extra mortgage payments.
"Are extra mortgage payments advantageous? This financial calculator helps you find out how much interest you can save by increasing your mortgage payment. View the report to see a complete amortization payment schedule, and how much you can save over the life of your mortgage"