The typical amortization schedule for a home loan provides for an even
number of payments that consist of an identical sum of money each month. Each payment consists partly of mortgage
principal, interest, and taxes. In the early years of the mortgage, most of the payment is interest, with only a small
portion being applied to the principal.
By adding as little as $20 or $50 a month the term of the mortgage can be reduced a lot. As the principal is reduced, so is the interest that is due on the remaining balance. This compounds over time, reducing the overall time of repayment. For example an extra $50 each month on a $200,000 mortgage at 6.5%, will cut more than three years off of the repayment schedule.
