How to Pay Off Your Mortgage Early - Your Path to Financial Freedom
For most homeowners, their mortgage represents the largest source of debt and their biggest monthly payment. If you could eliminate this payment every month, your financial situation would become much more flexible. By paying off your mortgage early, you can save thousands of dollars on interest charges and start using your money for something else every month. If you are interested in paying off your mortgage early, you have a few different options to consider.
- Difficulty:
- Moderate
Instructions
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Add an amount of money onto your normal monthly mortgage payment. For example, if you will add $100 onto your mortgage payment every month, you will end up paying off your mortgage faster. This extra money is applied to your principal and reduces the loan balance. This lowers the total amount of interest that you have to pay and get your mortgage done faster.
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Make a lump sum payment towards the principal on your mortgage. For example, if you make a large payment once a year in addition to your normal mortgage payments, you can significantly reduce the balance of your loan. Some people choose to take a bonus or a tax refund and apply the entire amount to the principal balance of the loan.
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Set up a bi-weekly mortgage payment plan. With this option, you make half of your normal monthly mortgage payment every two weeks instead of making one big payment every month. By doing this, you end up making 13 full payments over the course of a year. This is essentially the same as making an extra payment each year. By doing this, you could cut years off the length of your loan term. You could set this up through your mortgage lender or by simply sending a half mortgage payment every two weeks.
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Tips & Warnings
Avoid paying large fees to your mortgage lender for allowing you to make bi-weekly payments. Some lenders charge a large enrollment fee for this program when it is very simple to set up on your own.
