How To Pay Off Your Mortgage Faster
Mortgage loans are designed so that anyone can own a home. The common 30 year payoff is intimidating to most people. There are those that have figured out how to pay the mortgage off faster and shed 5,10 and even 15 years off the life of the loan.
The interest rate of the loan should be as low as possible. If you are in better shape credit wise now then when you purchased you might consider refinancing to get the lower rate. A lower interest rate means a lower monthly payment and this can be very beneficial to be able to pay the mortgage off earlier. You also save thousands of dollars in interest with a lower rate over the life of the loan.
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.
If you do not have the ability to come up with a large amount of money each year for a one time large overpayment you can pay over each month. You will still need to find out if you will be given any penalties from your lender before deciding the amount. You pay an over-age amount each month with your payment and it will work the same way as the large onetime payment. Your loan will be greatly reduced and it will be much easier to come up with the extra money each month than the one time large sum.
If you want to find a way to reduce your mortgage by 10 years, 15 years, or more you will need to combine methods. You could begin paying your mortgage bi-weekly and benefit from those two additional payments each year and in addition pay an additional amount on each payment. By paying an additional amount on bi-weekly payments you not only enjoy two extra payments each year but you also have the benefit as if you paid a lump sum amount as well. The more you pay the quicker the payoff so check with your lender about penalties for early payoff amounts. Stay under the limits and if you are lucky enough to have a lender who does not have limits for overpayments then you can reduce the loan as quickly as you would like. .