How to Terminate All Mortgage Debt

A mortgage is a lien on a home.

When a borrower first purchases a mortgage debt, the reality of a long-term debt does not seem to be that cumbersome. After a few years of paying on the mortgage, however, many borrowers realize that, without action on their part, the debt will remain in place for 30 or more years, depending upon the term of the loan. Therefore, with additional principle payments a borrower can greatly reduce not only the term of the mortgage but the overall interest expense as well.

Things You'll Need

• Budget

Instructions

1. Create a family budget. List all income and all expenses for a full month. Try to find areas to reduce spending. Contact all service providers, such as cell phone, Internet, and cable providers, to see if lower monthly bills can be negotiated.

2. Create additional income through extra work shifts, overtime or a second job. Sell unused household items in a garage sale or online auction to increase extra funds.

3. Tackle mortgage debt one month at a time. One extra monthly payment per year on a 30-year fixed rate mortgage debt reduces the term of the loan by seven years. Start small by dividing a monthly mortgage payment by 12. Add that amount to each month's payment to equal one extra mortgage payment per year. To reduce the term even further, double that amount to cut a 30-year fixed-rate mortgage almost in half.

4. Add additional principle payments to your mortgage debt throughout the year as extra money is earned. Be sure to mark your additional payments as principle reduction payments, and not applicable to future payments.

Tips & Warnings

• Reduce and eliminate all other debt first, especially credit card debt, before tackling mortgage debt. Apply the monthly payments formally associated with the other debts to your monthly mortgage payment to knock down its balance first.

• Try to save up three to six months of living expenses prior to any large debt reduction plans. This gives you an emergency fund to tap into for unexpected expenses, as opposed to relying on debt to pay for these expenses.

References

• Dave Ramsey: Get Out of Debt with the Debt Snowball Plan
• Kiplinger: Extra Mortgage Payments Can Pay Off