Who doesn’t want to have a mortgage free house and enjoy their lives? We all do. By right financial planning, it can be achieved. I will share few strategies with you which will tell you how you can pay your mortgage off faster.
Bi-Weekly Payments
Most people prefer making one mortgage payment in a month. For easy numbers let’s say it’s $2000 per month. That would equal 12 payments over the year for a total of $24,000. Since there are 52 weeks in a year, if you divide that by two you end up with 26 payments over the course of a year. If you do each payment at $1000 (for the most part you would only pay twice a month, with a couple of months having an extra payment) you end up paying $26,000 over the year. And because mortgage interest is compounding, you are paying down more of your mortgage, more often so you’ll also pay less interest.
All you need to do to set this up is to contact your mortgage company. While you could just send in a payment every two weeks, this would mean you would first need to send in an extra two week payment (since otherwise your second payment would be two weeks late). You then make exactly 50% of your mortgage payment every two weeks. But keep in mind, bi-weekly is different than bi-monthly!
Make an Extra Payment Every Year
It is always a good idea to pitch in some extra money towards your mortgage every year. Making an extra payment will help you pay off more money. More you pay less interest you will be paying over the time. There are always ways you can collect extra money to add towards your mortgage like receiving bonus at work, cash as gift, and some little savings here and there. Reserve those funds for putting them towards your mortgage payments. Making extra payment is same as making bi-weekly payment. Make sure the extra payment goes towards the principle amount and not interest.
Round Your Payments Up
Another wise strategy is to round up the payment. Whether you are paying your mortgage on monthly or biweekly basis, round up your payment. Instead of $950, make it $1000. Little by little, these small amounts will add on and make a significant difference towards you’re your mortgage amount. You can easily do it by making minor adjustments to your budget.
Stay informed
Make sure to keep yourself updated about the interest rates and any new and emerging options. Right information and wise investment can save you money. Interest rates dropped, since I took mortgage. But I am in the middle of 5 year fixed term. If I know what can be the implications of breaking my current mortgage, I can reapply for a lower interest rate mortgage. It can help me save thousands of dollars.