Save Money, Pay Your Mortgage Off Early
Paying your mortgage off might sound as if it's a grand plan, particularly if you refinanced to a 30-year loan recently. However it's still a bright idea for homeowners to be seriously thinking how they can pay off their real estate mortgage; if not this year, then next year. Paying a mortgage off early can
substantially save on interest when compared to making the regularly scheduled house payments over 15 to 30 years. Making the payments sooner reduces your cost for housing, freeing that money up, you still must pay homeowners insurance, property taxes, home repairs and maintenance. A few might make an argument to allocate more cash for investments in place of doing away with low-cost debt.. However homeowners nearing retirement age should be free of a mortgage.
To pay your mortgage off early:
One way is to add some extra amount, such as $50 or $500, to every monthly payment, Don't give up necessities, such as medical care or sustenance. Some homeowners add just enough to every monthly payment to add up to one extra payment every year. Do the math: multiply one payment times 10 percent or divide a single payment by 12, then add the result to the extra amount paid each month.
(Try our mortgage calculators) Be certain the extra money gets applied to principal, and not interest or to your escrow account.
Another way to make those extra payment feel less painful is by making payments every other week in place of monthly. This results in 26 half-payments to replace 12 full payments.. Biweekly payments can take approximately six years from a 30-year loan.
A money gift such as a tax refund, a bonus or perhaps an inheritance, creates another opportunity to put extra funds toward paying off your mortgage early. This strategy works the best when you have no other, more expensive debt. "You should really pay off your most expensive debt as soon as you cane,. A few examples of high-cost debt include revolving credit cards, auto loans, almost all private student loans, and department store cards .
Another approach is investing a lump sum into a return that's a higher return than the rate on your mortgage, then take the principal, along with interest, dividends, and appreciation to pay your mortgage off when you retire.
Refinancing can also help pay your mortgage off earlier, the thought being that a reduced payment frees money up which can then be applied to extra principal payments. A way maximize a refinancing benefit, opt for a shorter loan term . For instance, if you've paid 10 years off your 30-year loan, refinance using a 15-year loan in place of another 30-year mortgage.
Selling your home might seem to be a drastic way to eliminate a mortgage, although it's certainly effective, freeing you up to purchase a more home that's more affordable by paying cash or turn into a tenant without any mortgage debt. Whether downsizing makes any sense is pretty much a question of your personal lifestyle and requirements It's "definitely something you can think about." However, forget about trying to play the housing marketplace by selling when the market is high and then buying low. That strategy is more appropriate for seasoned real estate investors.
(Read the Book, "So you Want to Refinance")
Homeowners without extra cash on hand could be attracted to tapping into a retirement account for paying a mortgage off. This brainchild has gained momentum in recent months, and there is legislation pending before Congress to waive early withdrawal penalties if money withdrawn from retirement accounts is used to pay on a home loan.
Feb 22, 2012