What are the three easy ways to pay off your mortgage early?

interest rate, mortgage banker, monthly payments, first time home buyer

Three Easy Ways to Pay off Your Mortgage Early

More than 20 million Americans own their homes outright.  Some bought their homes with cash while others made monthly mortgage payments year after year until they were gone.

Do you know that about two-thirds of the nation’s homeowners have mortgage payments?   How have you planned to pay off your mortgage loan?

The good news is, if you make extra payments on your mortgage, more of your payment will be applied to your principal.  If you have a $220,000, 30-year mortgage with a 4% interest rate by paying one extra house payment each quarter you save you will save $65,000 in interest and pay off your loan 11 years early.

By making payments every two weeks you would make one extra payment each year that will save you $24,000 in four years off of your mortgage balance.  Just by rounding up your payments or by applying a raise or bonus you have received, you could save you thousands of dollars a month.  When you make an extra payment the additional amount over the payment should go to your principal.   Check with your mortgage company to make sure it is applied to the additional principal payments and not the next month’s payment.

For first time buyers, you should consider taking out a 15 year mortgage rather than a 30 year mortgage.  Your payments should be no more than 25% of your take home pay.  If you already have a longer term mortgage than 15 years or if you already have a low interest rate, you could save on the closing cost of refinancing and simply pay on your 30 year mortgage as if it’s was a 15-year mortgage.  Or better yet, if you have a 15 year mortgage why not increase your payment to get it paid off in 10 years?  You would need to up your monthly payment to about $2,200 to get your 15 year mortgage paid off in 10 years.  You would also save $25,000 in interest and have five years to invest into a retirement or college fund.

Downsizing could be another step if you are trying to get rid of a large mortgage payment and use the profit to buy a smaller less, expensive home.   With the equity that you receive from selling your home you may be able to pay cash for your new home or have a smaller mortgage payment to reduce your debt.

If you’re looking to buy a home that fits your budget, or you’re ready to sell your home, consult an experienced real estate agent whose advice will save you time and money.   For more information please visit www.debyoungrealtor.com.






Tags: downsizing, first time homebuyers, interest, invest, mortgage equity, mortgage payments, principal, retirement and college fund, savings