Day 6
Subject: Paying your mortgage off fast
Note: Check with your Bank or Mortgage Broker
If you have a mortgage, understanding different ways that you can pay your loan faster to save money is an important part of personal finance that will really make a difference in your life.
It may seem like a good idea to always pay down your debts, regardless of the type. However, a word of caution first. If you still have high-interest consumer debt or a car loan with higher interest than your home, and your mortgage loan has a low interest, you should focus your efforts on paying down higher interest loans first.
Once everything else is taken care of, though, you may want to pay off your home for a variety of reasons. Maybe you want to be totally debt free so you can quit your job or other reasons. That’s okay. But the problem is, with interest rates on homes less than 4 percent, you can often earn more money by investing your money elsewhere. So, it really depends on your own personal goals regarding this issue.
If you do determine that you still want to pay down your mortgage fast, you can do that more quickly than you think. In fact, most 30-year mortgages can be paid off in 7 to 10 years without being too hardcore and broke all the time.
Pay Your Loan More Often
One way to pay down your loan without really trying too hard is to work with your bank to pay your mortgage bi-weekly instead of monthly. They’ll divide the payment in half, and you’ll pay it 26 times a year instead of 12. This will add one extra payment toward your principal each year (be sure to tell them to put that additional payment to the principal in full) and by paying more often, you’ll lower the principal faster.
Pay Down Your Principal
If you get a windfall, pay it toward your principal. Put all your birthday, holiday, and bonuses right toward the principal. When you do pay an extra payment of any sort to your mortgage company, it’s important that you specify that you want the extra payment to go toward the principal. When you do this, you’ll save money on your interest.
Refinance to a Shorter Loan
Another way to save money is to go ahead and refinance your loan for a shorter mortgage loan period. If you have a 30-year loan right now, you may be able to refinance to pay your loan in 15 years instead. But do understand that you don’t need to refinance in order to accomplish this. You can simply pay more to your principal on your own and avoid the refinance fees.
Now that you’ve learned the various ways you can pay down your mortgage, let’s talk about cars. Do you have a car? If you do or are thinking about borrowing to pay for a new or used vehicle, there are a few issues with auto loans that you need to know about. Don’t miss the next blog.