Four Tips To Paying Off Your Mortgage
When it comes to finding and purchasing that beautiful dream house, most people have to make some heavy financial sacrifices. Although most people typically plan on staying in their home through retirement, the initial home cost as well as the high monthly mortgage expense can be financially draining. Additionally, with the market perpetually fluctuating, having the home’s mortgage paid off as soon as possible offers homeowners financial security.
Use these four tips to pay off costly home mortgages as soon as possible:
1. Pay More
Although this seems like an obvious tip, utilizing this strategy effectively can significantly decrease mortgage payments in a short amount of time. Paying more each month by doubling up on payments a few times a year can make a considerable dent in the mortgage, for making larger payments more frequently shortens the total length of loan by reducing the amount of accrued interest.
Additionally, if homeowners pay a little more than principal, they receive a bonus. The lower the principal gets, subsequent payments are applied to the principal and less goes to covering interest expenses. However, when paying extra, be sure those extra payments are being applied to the principal balance. Depending upon the stipulations of the home loan, if extra payments are not specified to be used concurrently with regular payments, they potentially could get set aside as coverage for the next payment.
When refinancing, a homeowner can decide whether to refinance into a 10, 15, or 20-year mortgage. The most common choice is the 15-year mortgage loan, for even though the payments are generally a little higher, the interest rates are lower, meaning the loan will be less expensive in the long run since homeowners will be accruing less debt in interest. If you’re unsure which option to choose, it’s best to talk to a mortgage broker (you can search mortgage broker pakenham if you live in the Pakenham area, for example) to get up-to-date advice.
When refinancing is not enough to make a significant dent in interest rates, homeowners should consider applying for different, less expensive loans, such as a title loan from TitleMax. Taking out a lower interest loan to pay off a higher interest loan can sometimes be a smart decision.
3. Bi-Weekly Payments
Beginning with bi-weekly payments, these payments take advantage of the fact there are 52 weeks in the year and 12 months. If a homeowner pays half of their regular mortgage payment every other week, they will have made an extra full payment by the end of the year. From a 30-year mortgage plan, an extra annual payment can remove about six years from the loan.
4. Do It The Australian Way
In Australia, mortgages are usually set up like home equity lines of credit, meaning they double as checking accounts. When a person gets paid, they typically deposit it into their account, and as they spend money, money comes back out of their account. With an Australian method mortgage, interest is calculated daily instead of monthly. Because a person’s check has been sitting into their account before taking it out to pay bills, it has actually saved on interest. Use these tips to gain financial peace and security in owning your dream home.
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