For most adults, their first major goal in life is to buy a home. Once they do choose a home, save a down payment, and obtain a mortgage, all of a sudden, the next major goal is to pay off that huge debt. It doesn’t have to take the 25 or 30 years that most banks offer. A mortgage is a positive debt, of course, because it’s not like most credit card debt that results in a lot of interest with nothing that’s appreciated at the end of paying off that debt. If you buy a good property, it should appreciate in value and the sooner you pay it off, the better.
Pay off Your Mortgage Early:
- Free up more of your income. Your mortgage payment will probably be your biggest payment. Yes, it’s important to free up this major expense by the time you retire but why not free these funds up sooner? You could be investing some of this money in other areas, such as your retirement, or real estate investment, in order to make your retirement years even more golden.
- Save money on interest. The sooner you pay off your mortgage, the less interest you’ll have to pay.
Here are a few ways to pay your mortgage off early:
- Shorten the amortization period. Sure, a 30 year mortgage might make the payment sound more affordable but could you swing it in 20 years?
- Accelerated payments. Increase your payment frequency. Instead of just 12 payments per year, why not go with 26 or even 52? This could save a mint on interest and could help you pay it off much sooner.
- Increase your payments as your wage goes up. And round up your payment. If your payment is $939, pay $1000. Keep your payments the same if your interest rate goes down.
- Add as much as you can without penalty. Some mortgages will let you pay upwards of a 20% lump sum a year extra without a penalty. Take advantage of this!
- Periodically shop around. You don’t want to move your mortgage around every five minutes but if there’s a much better deal out there, consider taking advantage of it.
A home is probably going to be your biggest investment in life but you don’t have to be tied down by a mortgage for the bulk of your adult life. Some smart investing, living within your means, and putting extra income to pay down your debt fast will help you pay it off sooner and have more disposable and/or investable income. Why not set a goal to pay your mortgage off as early as possible and see how well it goes?
photo: Svilen Milev