Are you thinking if it’s possible to pay off your mortgageahead of time? There have been various stories about how some borrowers successfully shaved off their payment time for a significant number of years and saved on their home loan’s interest. These narratives vary, and are widely specific to the financial climate and individual situations of the borrowers at a particular time. Apparently, there is no clear-cut formula that could tell you how to pay off your mortgage early. However, there are indeed various clever practices that you could use in order to get off your mortgage bondage at the soonest time possible.
Making a 13th month payment
This does not mean you need to pay a whole month’s worth of extra payment on the 13th month. Instead, it means spreading it throughout the 12 months of the year.
Let’s say you have a $275,000 mortgage amortized for 30 years at a 3.5 percent interest. In this example, you are paying $1,077.95 each month. Using the “13th month payment method,” you divide this monthly amount by 12 which results roughly to $89.83. Next, you add this amount to the original monthly payable and thus you arrive at $1167.78 as your new adjusted monthly mortgage payment.
By doing this, you reduce the burden of paying for the extra bulk amount and you get used to the adjustment as you go along. You will also save four years worth of payments using this technique.
Paying biweekly results to the same reduction in your amortization. Simply take that amount from the previous example and divide it by two. The resulting amount – $538.98 – is what you will pay every two weeks. This translates into 26 half payments per year.
One advantage in biweekly payments is the huge savings on interest. Compared to only paying once a month, you can save roughly $37,838.91 when sending off two payments a month.
Take note: it is important to contact your bank or lender for any fees or charges on biweekly payments or you might be in for a surprise when you find this out later. Hidden charges on these fees may end up costing more than paying for your payables the traditional way so it’s better to proceed with caution.
Rounding off your payments
Another clever and effective mortgage payoff option is rounding off. For example, your monthly payment is $1,077.95 and you decide to round it off to $1,200, the extra dollars can accumulate over time and can save you months to years worth of mortgage payments.
Paying off your mortgage ahead of schedule is more plausible than you think. If you play your cards right and set your financial habits to this goal, you might be surprised at how easy it could get.
Talk to your financial adviser or a mortgage professionaltoday to discuss the best payoff tactic for your current financial setup.