Hello All,
I will explain a few simple ways to pay off your mortgage faster. Some are more easy to do and others require discipline. Let's get straight to the point.
- Biweekly payments. Simply check with your lender to see if they will allow you to pay half of the mortgage bill every 2 weeks. By doing so, you will be making an extra payment a year, 13 instead of 12. If they don't allow you, then you can do the next step which gives it the same result.
- Pay one extra payment a year. The extra payment can be applied as both a regular payment or you can apply it all to the principle. Since it is an extra payment, I recommend applying it all to the princuple. On a $350,000 loan, one extra payment a year will make you pay off your mortgage 4 years early and save around $35,000, assuming 4% interest. Of course, the higher your mortgage interest is, the more you save.
- One time payment towards principle. I mentioned that above with the 13th payment a year.
- If you get a pay raise, apply that to the principle. You will have to be disciplined to do this because we all like to spend extra money.
- My favorite is this. If you are getting a tax refund, apply all the money into the principle. Imagine putting thousands of dollars towards the principle every year. If you pay $5000 towards your $500,000 30 Yr mortgage at 5.70% (average on today's rate), you will pay off your mortgage 8 years early and save $169,804.49 in interest over the life of the loan. You can play with the numbers using this calculator. There are many calculators out there. This is just one of them. https://www.statebankfreeport.com/calculators/early-mortgage-payoff-calculator I hope this helps you save. Until then, take care.
