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A new home is one of the best purchases that you will make in your life. This could be your piece of history that you can pass down through generations to come. It’s also one of the most challenging as most of us can’t pay for it in cash. We must commit ourselves to paying for it continuously for more than 20 years and if we are not careful with our finances, we could lose our house and we can’t just go out and buy another one. Don’t think that losing your home will not have a long term effect. If it happens, it will cause considerable damage to your home and finances.

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When you work through the numbers, the savings that stem from early repayment of a loan can seem almost too good to be true. Can a few dollars a month really add up to, for example, $25,000 of savings?

When you save money over long periods of time and let the interest compound, the amount of interest you ultimately earn becomes very large. In effect, when you pay an extra $20 a month on a 9 percent mortgage, you’re saving $20 each month in a savings account that pays 9 percent. By “saving” this $20 over more than 25 years, you earn a lot of interest. In the earlier example, this monthly $20 really would add up to roughly $23,000.

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