3 Thrifty Ways to Pay off Your Mortgage Early
Think owning your home without mortgage payments is next to impossible? Think again! In fact, about thirty-four percent of homeowners in the U.S. no longer have a mortgage, according to U.S. Census data. It’s no surprise that the recent foreclosure crisis served as an incentive for homeowners to pay off their loans sooner rather than later as they want the stability of owning their own home in an ever changing economy. Here are 3 thrifty ways to pay off your mortgage early.
1.) Switch to bi-weekly payments: This tactic is a no brainer. There are fifty-two weeks in the year and twelve months. If you pay half your regular mortgage payment every two weeks, you’ll have made twenty-six half-payments, or thirteen full monthly payments by then end of the year. So you’re effectively making a full extra payment each year. Check if your bank will set up a biweekly mortgage payment plan and ask the bank to credit extra payments toward principal so you save more on interest expense.
2.) Creative Refinancing: There are a few ways you can refinance your home loan to help you pay off your mortgage early. You can refinance your mortgage to a lower rate but keep making the higher payment which helps shave years off your mortgage. Or you can refinance your mortgage to a shorter term which cuts the amount of interest you pay sooner.
3.) Give a little more: You’d be surprised what a difference even paying just a little more will make on paying off your mortgage sooner. Even something as small as rounding your payments up can help. For example: Round a mortgage payment of $644 up to $650. A mere $6 more a month on a $200,000, 30-year loan can save you four payments at the end of the mortgage loan!
Obtaining the dream of living debt-free by paying off your mortgage early may seem like a stretch, but it is actually a perfectly obtainable goal if you stay focused on your goal. Before you make extra payments, read your contract and make sure you won’t have to pay prepayment penalties. And remember to apply any extra money you pay towards paying off your mortgage to the principal balance, not just the next payment.
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