from Jen Gile
5 Ways to Pay off Your Mortgage Faster
Choose a Shorter Payback Period
-If you can afford a higher payment, consider doing a lower term such as a 15yr fixed mortgage. This allows you to pay off your home within a shorter timeframe and helps you save tons of interest. You can typically also take out a 25, 20, and 10 year fixed term as well on most loan products.
-The more you pay toward the principal balance, the fewer payments you will make in the end. For example if your payment is $975 a month, make a payment for $1,000 a month and apply that extra $25 directly towards the principal. It may not seem like much, however it adds up over time.
Make Bi-Weekly Payments
-By paying half of your mortgage payment every other week, you will make one whole extra month’s payment by the end of the year. This is something you can set up to do automatically. One thing to keep in mind is that there are a few months every year that have 5 weeks in them which means you could have more than your typical mortgage payment taken out of your bank account that month. Make sure you have the extra funds in your account in order to not be overdrawn.
Make an Annual Lump Sum Payment
-Consider using a tax refund, unexpected inheritance, or annual bonus to apply directly to your principal balance to save on long term interest.
Double the Principal Each Quarter
-Four times a year double the principal amount and add it to your payment. For example, if the principal portion of your payment is $500, add an extra $500 to the regular payment to be paid directly to the principal balance.
Good rules of thumb
-When possible always set up an automatic payment online. This keeps you from potentially missing a payment and being assessed a late fee or worse negatively affecting your credit score.
-When making an extra payment to principal, do this directly on the mortgage company’s payment site so that you can assign these funds directly to the principal. If you do not designate what the extra funds should go to, it is possible it can be assigned to your escrow balance or even future interest.
-If you make 1 extra payment a year, this equates to lowering a 30 year fixed term to approximately a 23 year fixed loan.
-Make sure to always check with an accountant before filing your taxes to make sure you are taking advantage of all of the tax benefits of owning a home.
If you would like information on current interest rates, just email Jen at [email protected]
LeaderOne Financial Corp.
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