Paying off your mortgage might sound ambitious, especially if you have recently refinanced into a 5-year term. But its still smart for homeowners to give some serious thought as to how theyll pay off their home loan. An early mortgage payoff can net substantial interest savings compared to making scheduled payments for 15 or 30 years. Paying more quickly reduces your housing cost, freeing up that money for other needs and wants. Youll still be responsible for property taxes, homeowners insurance, and home maintenance and repairs, but your mortgage payment will disappear. Once that money can remain in your pocket, you control that money. Its yours. Its not going to someone else. An argument can be made in favor of allocating more cash to investments instead of eliminating low-cost debt. Being mortgage-free can be a very beautiful thing, especially for homeowners near retirement age. Here are six ways to get rid of your mortgage. 1. Add anywhere from $50.00 to $100.00 to each mortgage payment. You shouldnt sacrifice crucial expenses like food and healthcare, but you should make it a habit to contribute a little more than the bare minimum to your mortgage. 2. Make an extra payment once a year. One way to make that extra payment less painful is to make payments every two weeks instead of every month. The result is 26 half-payments instead of 12 full payments. Biweekly payments can knock approximately six years off a 30-year term, as long as the extra amounts are applied to principal. 3. Pay off the most expensive debt you have sooner than later. You may feel scared to incorporate your consumer debt into your existing equity but you wont be sorry when you realize the reality of all your savings. Incorporate all your high-interest debt into the lower interest rates you are receiving on your mortgage loan. This will free up a bundle of money every month so you can put the newly released money back on to mortgage and literally pound away at debt. A more aggressive approach is to invest the lump sum for a return thats higher than your mortgage rate, then use the principal, plus appreciation, dividends and interest to pay off the mortgage when you retire. 4. Refinancing can help you pay off your mortgage sooner if you refinance to a lower rate. There is great news for all of you who have mortgages coming up for renewal. Rates a few years back were 3.05% and up, while todays fixed rates are as low as 2.69% for a five-year fixed term. Even if your mortgage is not up for renewal just yet, remember, depending on which lender your are with, the exit fee maybe worth the switch to a new lender with a better rate. If you are paying 3.29% for example and have a year or two left, your pre-payment penalty may be approximately $3,000.00. When you look at all the interest you will save in those two years by switching to a lower rate, it may be worth way more than the $3,000.00 penalty, which can always be blended into the mortgage. In two or three years, we dont know if rates will go up again as todays rates are abnormally low. You can lock in for 5 years and not have to worry about rates going up any time soon. 5. Selling your house might seem like a dramatic way to get rid of your mortgage, but its certainly effective, leaving you free to buy a more affordable home for cash or become a renter without any housing debt. 6. Always consult a professional when reviewing or renewing your mortgage terms to ensure you always get the best deal. If you have any questions, or want to know how you can maximize savings, I am always here to help.
Posted on: Mon, 08 Dec 2014 01:21:55 +0000
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