Paying off the mortgage on your home faster means that you will not only have the satisfaction of owning your own home sooner, you will also have the benefit of paying much less in interest over the years.
The faster you pay off your mortgage, the more money you can save, so here are some tips to accelerate your payment schedule.
Pay Your Mortgage Every Other Week (Bi-Weekly)
Did you know that if you take your monthly mortgage payment and divide it in half and then pay it every two weeks that you will end up making a full extra month of payments every year? This is called a bi-weekly payment program which has been around for a long time, and it’s still a good idea today!
You likely won’t notice the difference since the extra half payments occur in long months with bigger paychecks, but over the years this will end up saving you thousands of dollars in interest payments.The bank that now services your loan can set this up for you, but some of them charge a fee to do this. You can easily do this on your own, to avoid these extra fees.
For example – based on a $250,000 loan, if you were to essentially pay one full extra month of mortgage payments every 12 months, you would pay off your 30 year mortgage in just under 25 years. Double that extra payment to an additional two payments a year, and your 30 year drops to just over 20 years!
Make a Bigger Monthly Payment
Similar to the bi-weekly payment plan above, you can accomplish the goal by dividing your principal and interest portion of your payment by 12 and then adding that amount to your regular monthly payment. You will be paying that extra payment every year, but spacing it out over each monthly payment.
Put Any Windfall Toward the Mortgage
Was your tax rebate larger than you expected? Have you received an unexpected inheritance from a family member? Did you win a big pot of money in Las Vegas?
Put any unexpected chunks of cash straight toward your mortgage instead of spending them. This won’t affect your budget at all, because you were never expecting or counting on that money in the first place. But once again, it can make a huge difference in the overall amount of interest that you pay on your mortgage loan.
See A Financial Expert
However, keep in mind your particular situation. Spending every last penny paying off your mortgage as quickly as possible might not be the best option for you if you have no emergency savings fund or if you have a credit card languishing with high interest debt. You don’t need to handle this all on your own. We have some great Financial Advisors on our team to help! Check out our friends over at Symphony Financial. Paul, Taylor and Susan are local and have helped many of my clients, including my family.
It is usually more important to deal with these pressing financial issues before attempting to save money on your mortgage.
Please use a local, well established Sacramento mortgage and/or financial professional, to help you with this. Or email me and I will send you a wonderful spreadsheet/tool that I use daily to help my clients create payment strategies to pay down their mortgages and save money. I can show you a few quick tips to master the numbers quickly.
Meet Dan and Comstock Mortgage