How to Pay Off Your Mortgage Early
Sometimes you think that paying your 30-year mortgage payments will take the rest of your life but you can change that. Paying off your 30-year fixed-rate mortgage payment can save you a lot of money in interest charges. For example, you have a mortgage in your home of US$300,000 with an interest-rate of 5.5 percent, you can cut 5 years off your loan term and save around US$60,000 in interest if you pay one extra payment a year, according to the publication of SFGATE. Make sure your payment is applied to the principal balance and that your lender does not charge any prepayment penalties.
Another option is make an extra payment each quarter. Example: In a US$220,000 mortgage with an interest-rate of 4 percent in a 30-year period, according to Dave Ramsey, you will save US$65,000 in interest and pay off your mortgage early by 11 years. Also make sure your payment is applied to the principal balance and that your lender does not charge any prepayment penalties.
You also can use the biweekly payment system. That system is used to shorten your loan's amortization chart or schedule. What means that? Means that instead of making a 12 payments in a year, you will make a half-sized payment every 2 weeks, which will add up to a 13 payment a year according to the publication of The Mortgage Reports. With that extra mortgage payment, the principal balance of the loan will get reduced which will shorten the payoff period. Some banks can set up this payoff plan for you but if you do by your own you will not be locked into a biweekly payment contract with the bank if you change your mind.
And, if you receive an inheritance, tax refund or bonus, apply it to the principal balance of your mortgage loan making a lump-sum payment. The interest savings could be better than any potential investment.
And, finally, you can decide for a refinancing of your mortgage. Refinancing your mortgage is getting a new loan to replace the original. Refinancing your mortgage can help you get a shorten loan term and commit to higher payments to pay off your debit sooner. You also can take advantage of better interest rates. And, if your actual mortgage has a penalty for early payment you can refinance and choose another one without that penalty clause. Refinancing could allow you to pay off your mortgage early, years early,even; and, save you thousands in interest.
If you have any Real Estate question, please contact me:
Ana Claudia Nascimento-Realtor/Dunhill 100 LLC
