Most people would agree that it is tremendously liberating to own your home free and clear with no mortgage payment due each month. In fact 42% of Americans polled say that their mortgage is the debt they most want to eliminate. Here are some suggestions on ways to reduce the amount you still owe on your home and with it the interest you will ultimately pay.
Make bi-weekly mortgage payments; these involve 26 half payments each year instead of the more typical 12 full payments. That additional full payment over the course of the year reduces the principal more quickly thereby lowering the amount of interest you’ll pay in the long run.
Increase your mortgage payment; increases in your payment are attributed toward the principal. Especially if your income has increased after a few years of the loan and you’re able apportion more of your income toward the mortgage you will significantly reduce your total house payment as well as shorten the amount of time you’re paying a mortgage bill.
Make additional payments; Even if you can’t schedule bi-weekly payments or increase your monthly mortgage payment every month, each time you make an extra payment you’re moving in the right direction.
Refinance with a shorter term mortgage; If you have a 30 year mortgage, you can refinance the loan for a shorter term depending upon where you are in the payment cycle. While the payment may be higher, the loan will be paid off much sooner. If you’re fortunate enough to reduce your interest, that’s better yet!
It may be wise to have some financial pieces in place before paying down your mortgage. Here are some things to consider in paying off your mortgage sooner rather than later.
You should have 6 months in emergency reserves set aside. Very important too, is to have no other loans or credit card debt because these are debts that not only carry higher rates but their interest is not tax deductible.
Plan for how much you’ll need to save in college funds, for retirement and other financial goals. Those funds need to be set aside or invested, too.
If your plans are to stay in your home for a long time (this can be hard to judge) paying down the loan makes sense, but if you fairly certain you’ll be moving soon you’ll probably want to keep your resources more liquid.
Please think about these ways to free yourself of mortgage debt burden more quickly than your initial loan term and join the 1 in 3 homeowners who own their homes free and clear.
