How to Pay Off Your Mortgage Early?

Buying a home is a dream to a lot of people. There are over 20 million Americans own a property. Some of them bought it with cash while the rest are doing mortgage in different terms. For most of us who is getting a loan from the bank has to pay for this bill every month for at least years, which also means we can’t stop working until this debt is being paid off. Here are some suggestions that can help us to pay off the mortgage quickly.

Just a little bit more every month
By making a habit to pay a little more towards the principle every month help shorten your terms by at least a quarter. Let’s see this example.

Example: A $220,000 mortgage among with 4% interest rate and a fixed 30 years term

Method 1: Making an extra monthly payment each quarter(or total in 4 extra payment per year) can help you saving $65,000 in interest and pay off your loan 11 years early.

Method 2: Paying half of your monthly payment every two weeks (bi-weekly payment) allows you to make one extra payment every year which also shorten your regular loan payments by 4 years.

Method 3: Round up your payment to pay an extra few bulks to the mortgage can also help shorten the mortgage term.

Method 4: Make an extra payment whenever you get some savings or a bonus.

No matter which method you choose, make sure all the extra money go towards the principle in order to shorten the mortgage terms. Also, double check with your lenders before making any extra payments as some companies only accept extra payment at specific times or they will charge a prepayment penalties.

Shorter term is always better
In most cases, a 15-year mortgage is always give you a better interest rate than a longer term such as a 30-years mortgage. However, I will only recommend for a 15-years loan if the monthly payment is 25% or less of your take-home amount or this may give you a hassle.

Another way is to refinance your 30-year mortgage to a shorter term or with a better interest rate. However, if you are already having a good interest rate with a 30-year mortgage, you can simply keep it but instead of making your normal payment, do it like a 15-year mortgage so that you can still pay it off earlier.

Downsize
The last method is even better but not that many people are willing to do that. The house market is keep rising year after year and for those who bought their properties long long time ago now the market price probably double or even triple of what they got it for. The simplest way to pay off the mortgage earlier is to sell the property, pay off the loan and use the rest of the money to get a smaller house. This is probably one of the best way to make yourself get rid of the loan faster and easier.

My recommendation is buy what you can afford, the smaller the loan amount that you handle, the less stress and the more extra money that you can save in your pocket. We are living for fun and not for stress and paying debt so why have to make yourself struggle and loop in all these bills? So before next article, please take care yourself and have fun.

Cheers.

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About Jan
I love to chill and I love to sing. I enjoy every single moment in my life with my lovely family.