How to pay off a mortgage faster: The road to full ownership
For the many home owners who have opted for a mortgage that requires payments to be made for the next 25 years, it may feel like they’re going to spend off most of their lives paying off house loans. However, it indeed is possible to reduce the time that is required to pay off a mortgage without having to make any extra payments, just by making use of some smart strategies.
Smart thinking and money management are required to ease off the loan payments and pay the entire mortgage before the tenure. In this article there are a few points that might help borrowers become loan–free in the shortest term.
Bi-weekly payment plans
Most mortgage payers make their payments once at the end of each month. However, some accountants suggest it might be better to calculate your mortgage payment amount, split it in half, and try to pay the amount twice every month. Mortgage calculator websites can help with doing the maths.
This simple strategy makes sure that at the end of the year, payments will have been made that are equivalent to 13 months’ payments, which means that for a mortgage that was originally supposed to be paid over 30 years, the same amount will be covered in 24 years. In a mortgage plan of 15 years, making bi-weekly payments will take at least one to three years or more off the repayment time. This of course depends upon the amount of the loan and its rate of interest.
The accuracy of the top mortgage calculator website depends upon the accuracy of the data entered into it, so it’s important to check all the minute details before proceeding to make any payment.
Smart budgeting to allow for an extra payment at the end of each year
Some people will be reluctant to add the extra hassle of making bi-weekly payments every month, and for them a good option is to plan budgets in a way that enables paying off an extra month’s payment at the end of the year. Obviously this depends on the mortgage amount, and, again, it’s paramount to always do the maths before choosing any mortgage to ensure a clear understanding of how much is affordable and stay steady through the course.
To implement the annual strategy, it will be necessary to save some money from work bonuses or tax refunds. This way allows borrowers to cut repayment terms by up to seven years by simply earmarking the total amount of the loan principal and making a single additional payment each year.
John Pataky, the chief banking officer and executive vice president for TIAA bank, notes that the more frequently payments are made to make lessen the principal amount, the more rapidly the cost of borrowing will go down.
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