Use Accelerated Weekly or Bi-weekly mortgage payments
With an accelerated payment, you will make an extra mortgage payment a year. The effect of making an extra mortgage payment a year will reduce a 25 year amortization to 21 years.
Increase your mortgage payments every time you get a raise.
Your initial mortgage is based on today’s dollars; however, with inflation, you can expect that your income will increase annually. As your income increases, increase your mortgage payments by the same amount that your pay has increased. If you get an annual bonus, then put this extra money towards the principle balance of your mortgage.
Never get an open mortgage unless you are absolutely certain that you will pay it off
The average closed mortgage allows for annual prepayments of 5%-20%. You can also increase your payments on most mortgages. An open mortgage allows you to pay off the mortgage in full; however, the usual premium you will pay is approximately 1% above the regular closed rates.
If you are going to pay your mortgage in full, then you can even pay it out at your renewal time and avoid the penalty.
Keep your payments the same, even if your interest rate goes down.
When your mortgage comes up for renewal and the interest rate is lower, then keep your payments exactly the same.
You have made your payments through your previous term at this level, so keep your payments the same, and you will pay off your mortgage even faster.
Round up your Mortgage Payments to the nearest hundred
If you have payments of $460, then you should round the payment up to $500. The extra $40 will pay off the principle balance faster.
Take a Variable Rate Mortgage instead of a Fixed Rate Mortgage
If you can handle the stress of your interest rate going up, then consider getting a variable rate. Over time, the variable rate mortgage usually outperforms a fixed rate mortgage.
Make a Prepayment with your extra money
If you have extra money at the end of the month, then you should put it towards your mortgage balance. Idle money does not help your finances. You can make a prepayment for as little as $100.
Use your Tax Return to pay down your Mortgage balance
When you receive your annual tax return, apply this money towards your mortgage balance. This is extra money, so it is not included in your budget, so you should not use it to pay down debt.
Put your extra Income towards your Mortgage balance
If you pay 35% of your annual income towards your mortgage balance, then when you receive a bonus or work overtime, you should apply 35% of this bonus income towards your mortgage balance.
Get unbiased Financial Advice
Financial advisers who work for banks or get paid by banks, work for the banks. This means that they will provide you with biased advise that will help them to sell the banks products. If you pay for financial advice, then you are more likely to get the best advice that will work for you, and you will be motivated to use that advice.
These tips are difficult t implement for most people because it takes discipline and dedication, but by understanding that you will save thousands of dollars in interest, then consider taking steps to paying off your mortgage faster.
The best way to get rich is by paying off all your debts.
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#1 by top10 fixed rate mortgages at November 30th, 2009
The biggest shocker for me is the difference in quality of home you can get renting to when you are buying, I think you really have to downsize when you take out your first mortgage if you are used to renting.
#2 by Top Home Loans at December 2nd, 2009
That is a good point. For the same costs of a mortgage and renting, it can be as much as 50% less in size. This seriously hinder your quality of living.