There are many different reasons people want to pay off their mortgages and debts earlier. A 30-year home mortgage can be overwhelming to think about. People want to pay off their debts early because they want to prepare for their retirement. They may also want to remove the stress and financial burden of being in debt. You might also want to increase your cash flow, especially if you have a fixed and sizeable income.
What’s the standard mortgage rate in Tempe or other cities? Even before you sign the contract, you should be well aware of how much interest your debt is going to incur in 30 years. The goal is to finish paying it off well before the term ends. But how can you do that? How can that be possible given your financial situation?
Make Biweekly Payments
There are 52 weeks in a year. Under the usual circumstances, you will make 12 full payments. But with a biweekly schedule, you will be making 13 months worth of payments. You do this by making half payments every two weeks. If you are due to pay $1,500 a month, make a $750 payment every two weeks. Depending on the interest rate on your loan, that can result in thousands of dollars worth in savings. You might also be able to pay off your debts five or eight years earlier. The best thing about it is that it won’t even make a dent on your monthly budget.
Make sure that the bank allows this kind of payment schedule. Don’t pay a fee so that the bank will accept your biweekly payments. You can open a new bank account and deposit the money every two weeks there. Use that money on every second deposit to make a full mortgage payment.
Pay off the Principal Amount
Mortgage lenders will allow you to make payments for the principal amount only. That will reduce the total basis of the interest rate. You can make a $50 payment on the principal every month. That will reduce the total number of years you’ll have to pay the debt. For example, you have an odd payment amount such as $1,045. You can make it $1,100 and have the extra $55 go to the principal amount of the loan.
Use Your Windfalls for Payment
As a taxpayer, you are usually eligible to get a tax refund every year. This money can amount to a couple of thousands of dollars, depending on how much you make in a month. Why not use that money to pay off your debt in advance? While you are inclined to save it for emergency purposes, you can use a portion of it to pay your mortgage. That will cut down the number of years you’ll have to pay for the loan. Other financial windfalls are a bonus from work, a salary raise, a gift from a relative, and an inheritance.
Paying off your mortgage early is possible, but it involves a little sacrifice on your part. By saving and practicing frugality, you can put your money to better use such as paying the principal amount of your loan. This will save you a lot of money in the end. Not to mention, you won’t have to sleep at night knowing you’re in a 30-year loan.