How To Pay Off Your Mortgage Faster
For most people a mortgage loan of 30 years is the only way for them to affordably own a home. The monthly payments are all they feel they can afford. If they were to be told they could pay their mortgage off faster and not have to come up with more money or make changes to their budgets do you think they would go for it?
Most people do not realize how easy it is to pay a mortgage off faster than the bank states. The first rule should be to have the best possible interest rate. If your credit score is better now than when you obtained the loan refinancing might be in order. The lower the interest rate the easier to pay the loan off quicker and you also save thousands in interest payments.
For those who want to benefit from early payoff but do not want to experience a squeeze on their budgets paying a bi-weekly payment instead of a monthly one will work. A bi-weekly payment plan actually pays two additional payments to the loan each year. This can greatly reduce the life of the loan. Since you have paid nothing more than you are used to the budget remains intact and you feel no ill effects of this method.
You can choose to pay a large lump sum annually. The large amount of money goes directly to the principle and can dramatically reduce your loan. Most lenders will have limits of the amount of over payment you can pay without penalty so speak to them and find out what limits you are restricted to if any. You might be able to shave off 5 or ten years using this method. It can be hard to come up with so much money at once for many people.
For the average person coming up with 15% of the loan amount each year is impossible. To be able to still reap the benefits of over payments and not kill yourself coming up with the money you can pay an additional amount with each months payment. The amount you decide on is up to you and what you can afford as well as the lenders penalization limits.
The most effective way to pay your mortgage off faster is to combine methods. The most common way to do this is by paying an additional amount on your bi-weekly payments. The bi-weekly payments you will not feel at all in your budget and will only notice the overage each 2 weeks. You can pay whatever amount you feel comfortable with and make sure it is affordable. If some weeks you are able to pay more than you can certainly do that. The overages as well as the two extra payments per year can reduce your loan life up to 15 years depending on the amount of overage you choose. You may be lucky enough to have a lender who does not penalize for early payoff, in this case you can pay as much as you wish and never see a penalty..
