A simple formula assisted a young couple in paying off their mortgage 21 years early
- The “1/12 rule” was adopted by a millennial couple who paid off their mortgage 21 years early.
- To begin, do the following calculation: Your mortgage payment is one-twelfth.
- Then, you pay an additional amount each month, resulting in a further annual payment.
Marques and Shyra, a married couple from Sacramento who chose to remain anonymous online, paid off their house 21 years ahead of schedule.
After purchasing the house in 2009, they immediately set out to find measures to reduce their mortgage debt, beginning with boosting their income and reducing their spending. For example, Marques started working as a musician, paid off modest debts, and avoided lifestyle creep as their revenue grew.
The 1/12 method was then discovered. Their mortgage payback quest, which they completed in 2017, grew more dependent on it. So they’ve made it a rental property and are now making money passively.
Your monthly mortgage payment should be divided by 12
The “1/12 rule” proved to be a practical method for making additional loan installments on PaydayNow and making progress on their debt.
“Divide the amount of your monthly mortgage payment by 12. Increase your monthly mortgage payment accordingly “By way of an email. Marques informed Insider
He went on to say, for instance, “One-twelfth of a monthly payment of $1,000 is $83. After that, you’ll contribute $83 to your principal as a final payment.” Each month, you’d have an additional $83, bringing your total monthly payment to $1,083.
This calculator breaks down a $1,000 yearly mortgage payment into 12 smaller amounts of $83 each, making them more manageable.
Adding $83 to the principal each month, this $1,083 will contribute $1,000 each month toward the mortgage main (the amount borrowed), plus interest (the cost of borrowing that money). No matter how little, any additional payment will help reduce the remaining principal, which will result in a reduction in the total interest you pay throughout your loan.
Marques advises checking with your mortgage provider before you begin to ensure that you’re paying the correct amount. Extra payments should go to the principle rather than interest to accumulate savings over time.
As a further step, make biweekly payments.
This 1/12 payment was made bi-weekly by Marques and Shyra, who also changed their mortgage payment schedule to bi-weekly.
An additional $2,158 in annual payments instead of $1,000 was paid by the pair every other week instead of only once every 12 months as was initially planned. More than two more monthly payments are required.
It is feasible to shorten the term of a mortgage by making more principle payments and reducing the amount of interest paid during the life of the loan. It would take 13.5 years to pay off a $100,000 mortgage with a 3.5% interest rate, compared to 11.5 years if the monthly payments were applied.
You may even go further and automate such payments, making it easy to conduct them regularly. Immediately withdrawing money from a checking account is one option. Still, you may also call your mortgage lender and have them take the money directly out of a savings or checking account.
If you automate additional payments, you may begin to pay off your mortgage much more quickly, and you won’t even have to think about it.