How To Pay Off Your Mortgage Sooner – And Why You Want To
According to a DexOne Corporation survey, as reported by CT Power Team, “42% of Americans say that their mortgage is the debt they most want to eliminate.” That is a completely understandable goal when you consider the savings. The important question is "How can I do it?” Here are some examples…
- Increase your monthly mortgage payments simply by adding a fixed amount to your required payments. The easiest way to do this is to use an increase in your income from time to time to increase the amount of your mortgage payment. Doing that does two things for you...
- It decreases the amount of principal owed by a larger amount each month.
- The following month, after making an increased payment, you pay less interest because of the larger decrease in the principle.
The combination of the above two changes results in paying off the mortgage in less time than originally scheduled and you will pay significantly less total interest.
- Make additional payments on the principle at any time if you can’t increase your regular monthly payment. You can do this anytime you have a little left over at the end of the month, or you get a bonus at the end of the year, or you receive a gift. No matter how much, or how little, you pay extra it will decrease the time it takes to pay off the mortgage. That means you will save interest.
- Refinance with a shorter-term mortgage if you see the interest rates come down. Just keep in mind that refinancing means spending money on loan closing costs. Only consider this if the interest rates are lowered enough to justify paying closing costs. Otherwise, you can always choose to keep your original mortgage, but increase the monthly payment as outlined above.
Here’s just one example of how paying off early works…
Let’s assume you are paying on a 30-year mortgage for $200,000 at a 5% interest rate. If you pay off the mortgage in 30 years, you will pay $186,512 in interest. If you pay off that same mortgage with even payments over 20 years, you will pay as little as $116,779 in interest. That’s $70,000 that stays in you pocket!
Visit bankrate.com for more in-depth information. Also, use their online mortgage calculator. You will never regret paying off your mortgage sooner then planned.
Information courtesy of Wilmington DE Realtor Tucker Robbins.
