Tips For Reducing Your Adjustable Rate Mortgage Total Payments

Are you interested in saving money on your mortgage payment? Of course you are. You can save money on an adjustable rate mortgage, also referred to as a variable rate mortgage, by changing your payment schedule.

If you have an automatic payment plan for your monthly mortgage payment with your bank, then instruct the bank to make weekly withdrawals from your account instead of monthly withdraws. You will still end up paying the same amount of money each month – just divide the monthly payment by four, but the amount of money you owe against the principal will decrease quicker.

This works because of the compounding effect that interest has over time. By paying your mortgage down more frequently - and not just an adjustable rate mortgage, but fixed interest mortgages can be paid down quicker - you are reducing the amount of money owed at the end of each month. As an example, assume you owe $1000 per month and are being charged 1% interest per month (that's a high annual interest rate). If you pay off the loan in one month, you will owe $1001. Instead, if you pay $250 per week for the first three weeks, you will owe less than $251 for the last week. After the first week, the interest payment due is based on $750 and not on the full $1000. After the second week, interest is based on $500, etc. While this is a hypothetical and simplified example, this helps explain how you can reduce the amount of money owed on a mortgage.

First Time Home Buyer