How To Pay Off Your Mortgage Early

How to Pay off Your Mortgage Early- it is simpler than you may think and saves you tons of interest for the remaining term of your loan.

A mortgage is generally one of the biggest debts that a person faces in life, and a large part of that expense is due to the interest that is added on as time goes by. This is especially true now since interest rates are on the rise.

Most homeowners would gladly reduce that debt if the opportunity presented itself. They do not realize that the key to reducing their mortgage debt lies in reducing the amount of interest that they pay on their mortgage.

By paying off their mortgage months or even years in advance, the interest that they would have paid during that time obviously will not have to be paid. Also, the interest that will be paid will be at a reduced rate because they are reducing the total amount that the interest is applied to at a much faster rate.

The trick, of course, comes in figuring out a way to pay off the mortgage early. For individuals who live on a tight budget as it is, the thought of paying even more toward their mortgage may seem almost laughable.

There are a number of ways that homeowners can pay down their overall mortgage in order to pay it off early without having to cause a strain on their finances, as well as services that can assist them in doing so if they aren’t able to accomplish it on their own. Here are just a few examples of how a mortgage can be paid off early without causing undue financial strain.

Pay Extra Principal To The Balance Each Month-with your monthly payment…

This is one of the most simple ways to pay off your mortgage early. You do have to face additional closing costs or fees. If your interest rate is good or not that bad, then this is a simple method to make it happen.

It doesn’t matter how much or how little; unless your mortgage company has set a minimum. The greater the amount, the more interest you are saving, and the more principal you are reducing.

If you take your payment and can afford to pay $100 dollars to the principal amount it will pay off your mortgage earlier. Of course, you can pay $1,000 if you choose. Any amount at any time of the year reduces the principal of the loan and the term of your mortgage. The more the better.

Another way to decide how you want to do this is to take your remaining balance and re-amortize that balance to 20, 15, 10, etc. Then take that payment less your current payment and apply the remaining to the principal that is over and above your current principal, interest payment. This is for whatever term you decide you want to pay off your mortgage.

Additional Payments at Tax Season or Bonus Income- is another way you can learn How To Pay Off Your Mortgage Early

For many people, the amount that they receive in their tax returns is significantly more than their mortgage payment.

While you may have at least some of your tax money earmarked for specific purchases or to pay off other debts, using part of that money to make the equivalent of an extra mortgage payment once per year can significantly reduce how much you owe.

If you can afford to contribute more than just the amount of one payment or if you use this in conjunction with the savings plan mentioned above you can pay off your mortgage even faster.

Many people who receive bonus income take that income and apply it to their mortgage principal also. Again, it doesn’t matter how much.

You will soon see the difference in the remaining term of your loans and thank yourself for it.

Using Interest to Fight Interest

If you have a high-interest savings account, you can use that interest to help you pay off your mortgage ahead of time. Once or twice per year, pull out money from your savings that are equivalent to part of the interest that you’ve accrued and add it to your mortgage payment.

Provided that you have a high enough savings balance you should be able to make a significant impact on your mortgage debt by doing this. Over the course of the year, the amount that you add to your mortgage payments could potentially equal an entire extra payment or more.

Bi-Weekly Mortgage

Should you worry that you can’t keep yourself motivated to keep making these extra payments, you might consider if your lender has a bi-weekly mortgage service. The bi-weekly mortgage automatically withdraws one-half of your mortgage payment from your checking account every two weeks. Then make your payment for you when it comes due. This type of payment will help you pay 13 payments instead of 12.

Some lenders may not offer this product or you may not have the choice to change to a bi-weekly payment, however, it does pay an additional payment each year.

Last But Not Least-Refinance With a Rate Deduction for Your Mortgage

As a prior SVP of Operations, Underwriter, Loan Officer, and whatever was needed, I recommend that you study this option before doing it if your sole purpose is to pay off your mortgage earlier.

Question to contemplate…

What is your current interest rate?
How old is your mortgage?
Do you plan on staying in your home for a while?
Have you saved the money for closing costs that would be required for a refinance mortgage?
Can you reduce your rate of interest by at least 2% points?
Will you reduce the term of your mortgage?

With the above questions-here are the facts: If you do not have savings to pay the closing cost associated with the refinance; they will be included in your new mortgage principal balance. So are you sure to want to make your mortgage balance higher?

It is widely known that you would benefit more if you can reduce the mortgage interest rate by at least 2% points. Also, reducing the term of your mortgage will give you a higher principal, interest, taxes, and insurance(PITI) automatically.

With the interest rates on the rise at this given time, unless you paid points to reduce your interest rate by 2% points, it would be difficult.

Additional Post – Simple Tricks to Pay off Your Mortgage Earlier

If the answers are positive, and this is your choice, then go for it, but think about which of the above will in the long run save you money.