Tips on How to Pay Down Your Mortgage Faster
A mortgage is paid off through a mortgage amortization process over the lifetime of the loan in which each payment is first applied to interest accrued during the current payment period and then to reducing the outstanding principal balance.
What a lot of people do not realize is that, if the mortgage interest rate used is above 5.304% by the end of a normal payment schedule of a 30-year mortgage, the total amount of accumulated mortgage interests would have always surpassed the initial principle of the loan. Even if your rate is lower you can expect the total amount you pay to be close to double your original mortgaged amount.
Hopefully, this has provided some guidance as to why paying off your mortgage is such an important thing to try and do.
Here are a few highly effective ways to pay off your mortgage at an accelerated rate. It is important to remember that any of these tips can reduce the outstanding principle at any given point, either by making bigger payments from time to time or more frequent payments, in addition, to regularly scheduled. The goal is to gain less interest in between payments and reduce the total time of which interests are accrued.
Increase the Amount that You Pay Monthly
By increasing the amount you pay on your originally scheduled payment points whenever you can is something very easy to implement with your lender. This will allow you to put more money towards the principle.
Increase the Number of Payments that You are Making
Most monthly payments can be made either on a monthly, bi-weekly or weekly payment schedule. Ideally, when planning your mortgage payments (especially when trying to pay it down quickly) the more payments that you make the better.
The interest will continue to compound on the traditional monthly basis and should not to be accelerated by your lender. This means that the more frequent payments are made the easier it is to lower the remaining principle.
Try to Refinance to a Lower Interest Rate
Through refinancing to a lower interest rate, the required monthly mortgage payments would be also lower. This means that if you could maintain the same level of payments as before (with the higher rate), it would work out to be the same as being able to actually increase your monthly payments – without actually having to put in more money.
Ask About Shortening the Terms of Your Loan
If you can really commit to making increased payments on a regular basis, shortening a 30-year mortgage to a 15-year loan would also save you about half of the interest and probably is the fastest and most effective way you could pay off your mortgage.
You could also pay extra in such a way that the payments you make would be what you would pay if you had a 15-year loan.
The easiest way to do this is to use an online mortgage calculator to figure what your monthly mortgage payments would be if it were a 15 year rather than a 30 year and use that amount to pay on a monthly basis. By doing this you have basically just created a 15-year loan that gives you some leeway if some months you can’t make the higher payment, as you have your original 30-year payment to fall back on.