How to Get Out of House Debt

Financial debt can be stressful and overwhelming. It is possible to get out of house debt in a fast and practical way with accelerated mortgage payments. Even if you have a second mortgage, reducing and eliminating house debt can be an attainable goal. With careful analysis and increased payments, house debt can become a less strained and more affordable financial responsibility. Paying off any debt requires a focused mindset and a determination to reduce spending and use more disposable income to pay off costly loans.

Instructions

1. Make large lump-sum payments on your mortgage. However, you should consult your financial institution or lender before making a large payment on a home mortgage. Make sure the bank or lender does not charge a fee for making a lump-sum payment. Earmark bonus checks, tax refunds, Christmas accounts, stock dividends and financial gifts as funds for reducing home debt. Avoid unwanted mortgage interest by making lump-sum payments that are applied to the principal amount on a home loan. Check all mortgage documents and analyze how often a lump-sum payment can be made and how much can be contributed without incurring additional fees.

2. Increase your home mortgage payment schedule. Consult your mortgage lender to see whether bi-weekly mortgage payments can be made with no additional cost. If bi-weekly payments incur additional fees, prepay a small amount every month. Take the monthly mortgage amount and divide by 12. Pay this amount above and beyond the scheduled mortgage payment. Over the course of the year, an additional mortgage payment will be paid interest free.

3. Increase your mortgage payment amount to reduce house debt. Increase mortgage payments early in the mortgage so heavy-interest years will be reduced. Avoid the heavy interest that is assessed to a home loan during the first five years of the loan by increasing mortgage payments by the amount of interest. This is especially important if a large down payment was not made on the house.

4. Refinance at a lower interest rate. Refinance a mortgage loan to reduce house debt when there is a noticeable drop in interest rates. Pay toward the principal amount on the loan rather than the interest on the loan. The money that was paid at a higher interest rate can can now apply toward the principal. Avoid the pre-qualification process by refinancing with your current lender. You should also choose to refinance with your current lender if your income is hard to prove.

5. Shorten the duration of the loan. Switch from a 30-year mortgage to a 15-year mortgage. If the mortgage is less than 10 years old, this switch will cause your monthly mortgage payments to be considerably higher. Choose to shorten the duration of the loan only if there has been a dramatic increase in your monthly income.

Tips & Warnings

• Consult your lender about refinancing and making additional mortgage payments. Lenders often deal with foreclosures and are pleased to find customers who are trying to improve their financial situation. They may choose to waive any associated fees.

• Avoid paying beyond what your budget can handle toward a home mortgage. The result could be higher credit card debt, which is more costly than house debt.

References

• Kaboose: Family Budget Guide: Pay Off Your Mortgage
• AllBusiness: Five Ways to Pay Off Your Mortgage Loan Faster
• Mortgage Blog: Top 5 Tips for Reducing Mortgage Debt

Resources

• Calculators4Mortgages: How to Use the Early Payoff Loan Calculator