How I Spent My Tax Rebate: Paid extra on my mortgage


Some have asked me what's the best use for the $1,200 tax rebate (families with kids get more). That was an easy answer for me personally -- I paid extra on my mortgage principal.

You probably realize that each time you make the payment on a 30-year mortgage only a small portion goes toward actually paying off the principal, while a much larger share of it goes toward paying interest. For example, I calculated the payment for a $200,000 mortgage loan at a 5.5% rate using a mortgage calculator at The payment for a 30-year loan would be $1135.58. When one makes the first payment on that loan $218.81 goes toward the principal of the loan and $916.67 goes toward interest.

I then used that calculator to determine how much I would save if I put an extra $1,200 toward the mortgage. The mortgage would be paid off five months earlier and I would save a total of $5,677.90 in payments. You can do the same calculation for your mortgage at and see what that unexpected $1,200 could do for you.

Personally I've made the commitment to be totally debt free before I start retirement. I've found the best way to eliminate debt is the Money Merge Account (TM) system and I've been working with Theresa Bolton Lynch, who introduced the system to me after I wrote about the snowball effect for paying down debt. I've dubbed this system the snowball effect on steroids.

Lita Epstein has written more than 20 books including the "Complete Idiot's Guide to Improving Your Credit Score.