WAYS TO PAY OFF YOUR MORTGAGE FASTER
Would like to pay your Mortgage Faster?
This is how.
The vast majority of home loans today are built on a 30-year term. But just because your lender gives you 30 years to pay off your mortgage doesn& mean it has to take that long. There are many ways you can reduce the length of time it takes to pay off the mortgage, thereby saving yourself money. The quickest way is to take out a loan with a shorter term that reduces your total interest payment, but another method may work best for you.
Perhaps the quickest way to pay off a mortgage is to secure one that has a shorter term. Most mortgage companies offer 15-year notes. According to Good Housekeeping magazine a $150,000, 15-year loan at 5.5 percent interest would increase your monthly payment by $330 a month. But in return, you to pay off the loan in 15 years and potentially save up to $103,000 in interest payments compared to a 30-year note.
Traditionally mortgage payments are due monthly. But some mortgage companies allow you to make biweekly payments by splitting the monthly payment in half. Your mortgage company may not offer biweekly payments, but if there is no language in your mortgage paperwork prohibiting extra payments, not a bad idea to set them up yourself. Here why. According to Good Housekeeping, a biweekly payment plan allows you to make 26 payments in a year, or the equivalent of 13 monthly payments. Good Housekeeping estimates a biweekly plan can save you six years worth of mortgage payments and $37,000 in interest.
According to MSN Money, accelerator loans are more popular overseas but are making their way to the U.S., and they have the potential to shave your interest payments. You make your monthly mortgage payment, but there are two additional steps. First, you deposit your paycheck into an account connected to your mortgage, in most cases a type of home equity account. Second, whatever you don’t spend on living expenses each month is applied to the principal of your mortgage. This is a good plan for families that don’t spend more than they make each month.
Paying More than the Minimum
As mentioned earlier, there really nothing stopping you from applying surplus cash to your mortgage, unless it’s expressly prohibited by your lender. One example comes from Good Housekeeping magazine, which reported that even applying just $1 extra per month to your payment would reduce the term of a $150,000 loan at 6 percent interest by eight years and reduce your total interest payment by about $52,000. In this case you would start with a $900 mortgage payment and then pay $901 the second month, $902 the third month, and so on
Paying Off Other Debt
Chances are your mortgage loan is set at a lower interest rate than your revolving debt. If that’s the case, and your mortgage payments are fixed, one tactic is to pay down your other debt, and then use the savings to apply to your mortgage payment. The Motley Fool, a financial advice website, recommends several ways to pay off debt like credit card balances and car loans faster, including making more than minimum payments and using the method. With this method you apply extra cash to one debt until it paid, and then move on to the next. The increased payments could save you thousands of dollars that could be applied to your mortgage.