A mortgage is usually one of the biggest debts a person will have to pay off in their lifetime, and a big part of the cost is the interest that is added on over time. Most homeowners would be happy to pay off their mortgage debt if they had the chance, but they don't know that the key to doing so is to lower the amount of interest they pay on their mortgage. If they pay off their mortgage months or even years early, they won't have to pay any of the interest they would have had to pay during that time. Also, the rate of interest that will be paid will be lower because the total amount that the interest is applied to is going down much faster.
Of course, the trick is to find a way to pay off the mortgage early. For people who are already living on a tight budget, the idea of paying more on their mortgage may seem almost funny. There are many ways for homeowners to pay down their mortgage so they can pay it off early without putting a strain on their finances. If they can't do it on their own, there are also services that can help them. Here are a few ways to pay off a mortgage early without putting too much strain on your finances.
Putting Part Payments Asidebr>br>
Putting aside a portion of your mortgage payment from each paycheck is a simple way to pay off your mortgage early and may even make your finances easier to manage (or even from every other paycheck, if you get paid weekly.) If you save about half of your mortgage payment every other week, you'll have saved enough for an extra payment each year. Putting away a little more than half will help you save even more money, which will help you pay off your mortgage even faster. Depending on how long your mortgage is and when you start saving, this plan could save you months or even years. When your mortgage is due, all you have to do is pay whatever you have saved (which should cause you to end up with a few payments that are significantly more than the minimum payment.)
Extra payments during tax season.br>
If you don't want to keep track of your savings throughout the year, you might be able to make up the difference with your income tax return. For many people, the amount they get from their tax returns is a lot more than what they pay for their mortgage. Even if some of your tax money is set aside for specific purchases or to pay off other debts, using some of it to make an extra mortgage payment once a year can make a big difference in how much you owe. You can pay off your mortgage even faster if you can afford to put in more than the amount of one payment or if you use this along with the savings plan we talked about above.
Using interest to fight against interest.
If you have a savings account that gives you a lot of interest, you can use that money to pay off your mortgage early. Once or twice a year, take out enough money from your savings to cover some of the interest you've paid on your mortgage and add it to your payment. If you have enough money in savings, this should make a big difference in your mortgage debt, as long as you have enough money in savings. The amount you add to your mortgage payments could add up to a whole extra payment or more over the course of a year.
Mortgage services every two weeks.
If you're worried that you won't be able to keep up with these extra payments, you could use a bi-weekly mortgage service. These services will take half of your mortgage payment out of your checking account every two weeks and pay your mortgage when it's due. The system works like the above-mentioned paycheck savings plan, but since an outside company does all the work, all you have to do is make sure you have enough money in your account to cover the withdrawals. Even though the services charge fees to cover their costs, the interest payments you save will be much more than what you pay to the service.
