Owning your own home outright can take a tremendous weight off your shoulders and relieve a lot of your monthly financial burdens. While many families are working at and becoming more efficient about their finances, they are now understanding that there are plenty of ways to get ahead of the game and paying off your mortgage early is just one of them. Some people may feel that it is already a struggle to make their mortgage payments each month, but with a little belt tightening and a solid budget, nearly anyone can pay off their mortgage fast and early!
Here are several tips at how to get ahead on paying down your mortgage and eliminating that debt once and for all:
Start With Extra Payments
Prepaying your mortgage when you can afford to do so will help knock off a lot of interest, especially during the first 7 years you have the mortgage. Since the majority of the first years’ payments on a mortgage go towards interest only, you can make some serious headway by making extra payments as often as you can. Doing so will also allow you to build up your equity much faster.
Use Your Windfall Cash
When you get your tax refund or gain money through an inheritance, you can put that amount of money and apply it right to the principal of your mortgage. Any extra source of money you get your hands on, like an unexpected bonus from work, that is not already incorporated into your budget can really make a debt on your mortgage.
Tack On a Little Bit Monthly
If you can’t afford to make a whole extra payment or a sizable lump sum payment during the year, start tacking on some additional cash onto your monthly note. An extra $20, $50, 0r $100 may not seem like a lot of money but over time it does add up and will make a difference.
Follow Up On Your Payments
when you start making extra payments towards your mortgage, check in now and again to be sure you payments are being processed they way you intended. If you want to apply your extra payments directly to the principle, write a separate check and attach a note stating where to credit your extra payment. Stay on the mortgage company about your extra monthly payments. Sometimes when company representatives get an “extra” payment during the month, they do not know what to do with them and so they do nothing.
When You Shouldn’t Prepay
If you have a home loan that is already at a low interest rate, you may not want to consider putting extra cash into prepaying your loan. Instead, your money could be better used by opening a high-yield savings account and saving that cash. Let interest accumulate over some time and if, down the road you still have money left to pay on your mortgage, you can use what you have earned and pay off the mortgage for good using less of your own money.