Ways To Pay Off The Mortgage Sooner And Save Thousands Of Dollars
Owning your own home outright is amongst the most major accomplishments that an individual can make in their lifetime. The sooner that your mortgage is paid off, the more money you would save on interest costs. You can take years off your loan by taking some simple steps which will help make sure you are paying off your mortgage as efficiently as possible. Best of all, this method is totally free.
1. You will first acquire your credit score before you begin to shop around for the best mortgage. The ongoing service fees which the mortgage firm charges are usually reasonable, but it is better to know precisely what fees will be charged before you finalize a loan. It might be in your best interests to talk to a mortgage broker at this time.
2. The next step requires you to choose either weekly or bi-weekly payments. Having a bi-weekly mortgage means that you would be required to make 26 half-monthly payments as opposed to 12 monthly payments. Nonetheless, you would save a significant amount on interest. It is important to remember that if your mortgage is initially set up as bi-weekly, your lender can charge you an upfront fee of $300-$400.
Like for instance: Making two payments of $415 in leu of one $830 payment, interest savings over the length of the mortgage loan will be approximately $27,000 and would enable you to pay off your home faster by 4-1/2 years.
3. The third step is to pay a little bit extra each and every month. Even a small increase of a few dollars would decrease the amount still owing on your principal amount. If you can pay an extra 10-15% percent every month then you will be in a good position to pay off your mortgage sooner.
For example: By upping your payment from $830 to $1000 each and every month, you can save almost $48,000 in interest and pay off your loan 8 years early.
4. Making a lump sum payment at least once a year utilizing your tax refund, work bonus or from saved money, this can significantly help decrease the amount remaining on your principal. It is a good idea to check your mortgage documents to see how frequently you are permitted to prepay and in what amount to make certain that you will not be subjected to any additional fees. Even though nearly all mortgage loans do not prohibit you from paying off your loan early, some loans do have parameters about any extra payments which you can make.
5. At renewal time, it is wise to pay off as much of your remaining mortgage as you can. At renewal, you could pay off as much as you want since nearly all mortgages become open.
6. To ensure that your additional mortgage payments are going towards the principal, make certain to check your mortgage payment. Each and every payment you make should be correctly documented by the bank. Any extra payments which you make must be done using a separate cheque. On the memo line, make sure you note that they payment should be applied to the principal only. At the end of the year, when doing your taxes, compute the payments and make certain that the entire amount which you paid has been applied accurately.
7. The last step to follow is to make sure that you are staying current and are informed regarding your mortgage. New products are coming out each year and the interest rate is always fluctuating. There is the chance that you might want to shop around for a better product as time goes on.
Like for instance: You might only qualify for a lower-rate adjustable mortgage initially. At some point later on, you may decide to choose to a more affordable, fixed-rate long-term mortgage.
It is not always in your best interest to pay off your mortgage faster. Like for instance, some people might choose to invest in mutual funds when the yields return 10-12% every year. Usually, the majority of people choose to pay off their mortgage instead.
One more good time to avoid investing money is if you have plans to move in the near future. Saving your money for a down payment on your new home may be more advantageous then investing money into your existing house.
By following these simple steps and doing a little research it is totally possible to save thousands of dollars on your mortgage. Nevertheless, the banks would not tell you how to save money as that will make them lose money and their profits will come to a standstill.
Click to Download the pdf