Tips for Paying Your Mortgage Off Early
Many people aren’t aware that paying their mortgage off early is a feasible option, they tend to think that if they could pay extra, they would. The reality is there are several strategies you can use to reduce the principal loan amount and benefit from financial security and more free cash. Read on to find out more.
Refinance Your Mortgage
A good way to pay off your mortgage early is to refinance the loan to take advantage of better interest rates, but at the same time continuing to pay the savings you make into the principal amount. This strategy allows you to reduce your mortgage loan amount more quickly without losing out. Talk to a Mortgage Broker for more information.
It works like this: if you have a loan amount of say $350,000 on a 30-year loan, a fixed trade mortgage will cost you 3.98 percent. But if you refinance the loan, you could bring that down to 2.98 percent and make a saving of $195 per month. That’s the equivalent of $70,228, across the lifetime of the loan. If you’re savvy, you can then reinvested this saving into the principal loan amount, reducing it further.
Pay Less Mortgage Interest
Refinancing your mortgage to take advantage of lower interest rates and using a payoff strategy like the one outlined above is an excellent way to pay off the loan faster. But one other tip is to reduce the overall interest you pay and own your own home by paying off the loan early.
Your monthly mortgage payments are calculated by adding on the interest on the loan and dividing by the life of the mortgage. So your monthly payments include the interest on the loan. If you pay off the loan early, using the strategy above, you could save a significant amount of money – up to $100,000 on a mortgage of around $350,000.
More Payoff Tips
When you pay off your home early, you benefit from homeownership and more free cash. It might require a bit of creative thinking and financial discipline in the short term, but it will ensure a comfortable living standard and more security much earlier in life. Firstly, consider paying extra into the principal loan amount. This can be monthly, quarterly, annually, or even weekly – you will need a variable rate mortgage to do this.
Another tip is to round up your monthly mortgage payments. If your monthly payment is say $350, then make it $400. Psychologically you will get into the habit of making this payment, and it won’t feel like extra. You can also boost your mortgage payment with any extra money that comes in. It could be in the form of tax rebates or refinancing. Any loose cash you have can be an extra mortgage contribution.
Why Payoff Your Mortgage Faster
There are some obvious benefits to paying off your mortgage faster. You become a homeowner which gives you security, and you have more free cash to spend since you don’t have to pay a lump sum each month. Using the tips above, it’s more than possible to pay off your mortgage early and receive these benefits, but be warned, it does take time and discipline to achieve these goals.
*This is a collaborative post.
