We all have dreamed of living debt free life but how do we do it in this credit card era? One of the debts that is hard to grapple with is a mortgage debt simply because it is the most voluminous investment most people do. Signing up for over $200,000 home debt can be a blessing in disguise but we always think of the big question, “How can I get out of this huge debt sooner?
I strongly believe that Real Estate is still going to be the best investment anybody can try for the next fifty years especially if you are willing to hold the property for a longer period of time.
If you research on google how to pay your mortgage faster on Google, you will meet crazy titles like, “How I paid my mortgage in two years,” “How this family cleared their mortgage in 5 years” and I am sorry to burst your bubble, all those are trash talk! Clearing your mortgage in a short period of time boils down to this simple dogma, “Increase Your Principle” Period!
Here is an example: $100,000 mortgage at 6% interest rate paid over a period of 30 years has a monthly payment of about $599.55 and only about $99 going to principle in the first months.
Adding another $99 will double your principle, eliminate about 107 payments over the life of the loan, save you about $39,900 in interest expenses and shorten the mortgage period to about 21 years. WOW! If that did not inspire you then I am not sure what will.
So here are some of the ways to shorten your mortgage life span:
Refinancing to a Shorter Term
The only reason why financial institutions like the longer period of payments is because they are the ones who smile at the end of the day. The longer your payment period, the higher the interest you will pay therefore you are losing more. However, it is also important to note that refinancing to shorter mortgage period will increase your principle tremendously but reduce your interest. Do the math and check what works for you.
Shopping Lower Rates
A lot of people do not know that they can move their mortgage from one financial institution to the other if they are giving you a better rate. This is not a warranty to hop from one bank to the other. Remember that some banks charge fees to move your mortgage so check which one saves you money. Just understand the fact that you bought a house already does not mean the end of shopping for better rates
Bump Your Monthly Principles
Caution! Some financial institution have got stringent rules on how much you can go over your required annual payment, therefore, consult them before you increase your monthly principle.
Shift to Biweekly Payments
Take your monthly payment divide it by two and pay that amount after every two weeks. There are 52 weeks in a year and if you do bi-weekly payments then you will get about 26 payments. This means that you are adding an extra full payment per year. For a mortgage period of 30 years, you could be reducing your mortgage lifespan by about 6 years if you take this route.
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Josh OKELLO 