You may think that it's impossible, buy paying off your mortgage in a fraction of the time that it would normally take for a 30-year mortgage will save you thousands (potentially tens of thousands) of dollars. An article from Business Insider offers some tips of how to make this a reality for every family.
Obviously, everyone's situation is different, but abiding by these rules is great way to get you on the right track to fully owning your own property fast enough. Never take on what you can't handle, and having the guiding advice of a trusted financial advisor is perfect for understanding what you can and cannot handle for your finances.
These eight tips offer some logical guidance for getting you on track to paying off your mortgage and getting back to funding large and exciting endeavors.
1. Refinance your 30-year to a 15-year Mortgage
Obviously, the payments will be larger with a 15-year mortgage, but the interest rates and total amount of money owed for the mortgage will be tens of thousands lower. If you or your spouse got a significant pay raise since you originally started paying on a 30-year mortgage, refinancing to a 15-year will cause more of that extra money to get sucked up, yes, but think about how happy you'll be knowing your mortgage will be paid off in half the time.
2. If you refinance, make sure the payments are the same
If converting your mortgage to a 15-year from a 30-year is not an option, no worries. In a low interest rate environment, one can refinance their mortgage to take advantage of a better interest rate that will ultimately help them to save money in the long run. However, if you're refinancing to get lower payments, make a conscious effort to keep the payments the same as before. You'll be spending more money, but think of it as buying more near-term time.
3. Contribute the differences in your pay raises to paying off your mortgage
As mentioned before, if you receive a pay raise at work, and your living expenses were easily covered with your original salary, take the extra money you're making now and put it towards your mortgage payments. By the time you pay off the mortgage, you'll be happy to know you have all the extra cash left over. (Again, this saving tip is something that I mentioned my grandma did for much of her life and is living quite well at age 90.)
4. Always try to pay extra each month
So if you're not getting extra cash in the form of a raise, a new job or a bonus, no worries. You can still get a start on paying off your mortgage early by contributing a little extra each month.
5. Big sums can make a difference
A yearly tax refund, a work bonus, or an inheritance can also be used to pay down your mortgage faster. However, none of this money is guaranteed to happen for you, so if you happen to receive one of these things, awesome. If not, you should still have a plan to contribute more money to paying this thing down fast.
6. Bi-Weekly Payments = An extra payment each year
If you opt not to pay your mortgage every month, but instead make a payment every other week, you'll effectively be making an extra payment each year (26 weeks to pay for 12 months, but you'll effectively pay for 13 months). What does this mean? Well it means that every 12 years of paying a mortgage like this, you'll effectively pay for an extra year. And if its a 30-year mortgage, you can have it paid off in 27 years instead of 30.
7. Set a Target Payoff Date
All this is fine and dandy, but probably the most important item should be to have a GOAL date of when to have the mortgage paid off. This way, you can make it a challenge for yourself to ensure that you not only make it to that date, but have extra money saved up by the time you get there. Plan the work, then work the plan.
8. Use a combination of all of the above
It's tempting to just pick one or two strategies from above and call it a day. However, you can achieve your goal even faster when you use a combination of the aforementioned strategies. Paying a little extra only when you first get a raise is not a bad idea. And of course, having a goal is not bad either. Make sure you do what is best for you and your family, and never bite off more than you can chew.
Greetings, GradMoney Readers!
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