How to reduce the amount of interest you pay over the life of your home loan?

By making an additional payment each month (or annually), you can reduce the amount of total interest paid dramatically.

For example, if you purchase a house on Jan 1, 2013 for $850,000 with 25% down and a 30 years fixed loan at an interest rate of 4.25%, your mortgage payments are about $3,136/month. If you can afford to add $500 to your monthly payments, you will reduce the 30 year loan to 22 years and 11 months and save $131,306.

If you add an extra $250 to your monthly payment, for a total of $750/month, you will reduce the 30 year loan to 20 years and 7 months and save $172,840!

Go to and plug in the relevant values for your mortgage. By selecting the prepayment tab and entering different values for additional payments, you can figure out what’s the ideal amount you should add to your monthly payment in order to reduce the number of years you’ll pay the mortgage.

Give it a try and let me know if you need help.

Avi Urban