Becoming mortgage free is a great way for a family to ensure they have the security of always having a place to live regardless of their current financial situation. Unfortunately, a mortgage loan is also the highest bill that many families pay every month. Because of this, a lot of people want to get rid of the debt as quickly as possible, but few people really understand how to do it. Despite the number of scams and questionable pay off schemes out there, the best way to get rid of a mortgage is to put as much extra money into the loan as possible.
Getting your mortgage paid off as quickly as you can is one of the best financial decisions most families can make. A paid off home often reduces monthly living expenses by half and makes it possible for a family to meet their other financial goals, such as saving for retirement or paying for college. Furthermore, many people like the feeling of knowing that no matter what happens in their financial lives, their home is paid for and cannot be taken by a bank.
Unfortunately, too many people think that it is too hard to get their home loan paid off in less than the typical thirty years that most bank loans take to pay off. For many families and individuals, this means a lifetime of payments. Fortunately, there are several ways to get a home paid off quickly.
To start, make one extra mortgage payment every year. While this is an increase of less than ten percent to the amount that a person or family will spend on their mortgage in a year, but it can cut over seven years of payments off of a thirty-year mortgage. To make it easier, instead of paying it all in one lump sum, divide the cost of one extra payment by twelve, and add this amount to every mortgage payment. Doing this takes only a small sacrifice, and it can save thousands of dollars in interest charges over the life of the loan.
Next, apply half of any extra money that comes in to the mortgage. Think of bonuses at work, money from a side job or business, or tax refunds. By applying half of this money to the mortgage, it is possible to avoid years of interest payments and thousands of dollars in interest and PMI. By only applying half the money, it will still be possible for a person to feel as if he or she gets to spend the extra, and they will still make progress on paying off the mortgage.
Another way to spend extra to get a mortgage paid off faster is to refinance a mortgage. While this step typically requires a lot of paperwork and a few thousand dollars in fees, it can save thousands of dollars over the life of a mortgage. By requesting a shorter payment term, it is possible to force a person to pay off their mortgage sooner. Furthermore, having a lower interest rate and being able to show more of the balance paid off can lead to a big improvement in a person’s credit score.
Paying off a mortgage early will cost a lot upfront, but almost everyone who has done it doesn’t regret it. In addition to the security of knowing that a home is truly your own, a person who has paid off their home also has a much lower cost of living.