How to pay off the mortgage faster
Buying an apartment is a long-term commitment. It is also a great investment opportunity, with a lot of incentive to accumulate capital as quickly as possible. Investing in a home is more money in your pocket when you go to sell later. So get rid of your mortgage sooner rather than later - an effort that may be worth it for those homeowners who are planning to stay home.
If you have decided that you want to pay for your home faster,
There are a number of different strategies that can help you make this happen.
Start by choosing one or mixing and matching several that fit your budget and goals.
How to pay a mortgage faster:
Round up your monthly payment
One way to make a small but noticeable difference in your monthly mortgage is to round up when you cut your check. So if you owe $ 1,275, for example, send $ 1,300 instead. These extra $ 25 may not sound like much, but in most cases, you can make sure that additional payments go directly to your principal payment, rather than interest. Check with your mortgage lender to see if this is something you can arrange, and consider taking another $ 50 or $ 75 while you are tinkering to pay off your loan even faster.
Make an additional quarterly payment
Assuming your lender does allow you to apply additional payments to your mortgage fund, an alternative to rounding off your monthly payments would be to make a larger one-time payment once a quarter. Determine what is reasonable in light of your current financial situation and other financial goals, and if possible, aim to allocate one (or more) full payment for your loan in each quarterly period.
Pay bi-weekly instead of monthly
One trick on how to get your home back faster is to divide your monthly payment into two installments and pay on a bi-weekly basis. This reduces the cost of your total interest and also speeds up your repayment as it is equivalent to making 13 payments a year compared to 12. It is estimated that biweekly mortgage payments can help you pay off your mortgage about five years earlier on a 30 year loan period and can reduce your interest In the tens of thousands of dollars.
Check Mortgage Recycling
There are several benefits to refinancing your mortgage, and being able to reorganize your costs so you can repay your loan faster is just one of them. When you refinance, you take out your current mortgage and transfer it to a new mortgage with new (and ideally better) rates. If you can refinance while the interest rates are lower than they were for your original loan, you can lower the amount you owe each month. So just keep paying what you have already paid and let the extra money accumulate in your favor.
Go for a shorter term mortgage
Another way to use refinancing to repay the apartment faster is to use it to replace the 30-year mortgage with a 15-year term. Your monthly payments will go up, but you will end up paying significantly less interest over time. You will also have lots of equity available in a shorter period of time for something like HELOC (home credit line) if you decide to take one. Just make sure you have cash flow to support this option if this is the path you choose to go.
Redesign your mortgage
Redesigning a mortgage is similar to refinancing a mortgage in that it changes the terms of your loan, but it does not require you to transfer your existing loan or pay the heavy fees often to do so. Instead, to reshape a mortgage, you pay a high fee for the balance of your principal, then let your lender recalculate your monthly payment and re-reduce the loan based on the new balance. This strategy is usually used by homeowners who buy and sell a home at the same time because they can purchase a home and then redesign after selling their first home and putting the profit into their new mortgage.
Allocate all or some of the cash to your mortgage
Did you receive a tax refund? Did you get a bonus at work or a great cash gift?
While you are choosing how you want to save and spend your extra funds, consider transferring at least some of it to your mortgage.
Making a mortgage a priority in such cases ensures that you will not miss an opportunity to nibble on what you owe, and this can be done while separating money into savings and fun.
Invest wisely in the beginning
It will not help you if you have already purchased your home, but if you are currently looking to buy and know that you do not want to be with a mortgage in the coming decades, then make it one of the crucial factors in buying a home. That means you will not buy more home than you can afford - or even better, buy less home than you can afford. It also means not buying and repairing as it will require investing large sums of money for home repairs and improvements.
The decisions you make now can have a big impact on the logistics of your loan going forward. Whether it means changing the structure of your payments, paying more for your fund each month or quarter, or just buying a smaller and more affordable home, if you intend to pay off your home faster, there are definitely ways you can make that happen.
Is it wise to pay for the house early?
Now you know how to pay for the house faster, but is it something worth pursuing? It depends on what your long-term goals are.
Some good reasons to repay your mortgage faster include:
Debt cancellation
Cash clearance for other uses in the future
Reduce the total interest cost on your loan
Getting rid of private mortgage insurance, if applicable
More equity, which will help HELOC
Owning your home faster
All of these are good reasons to pay for a home faster, but it is important that you consider them in light of the possible disadvantages. Some of the disadvantages of fast mortgage repayment include:
Taking cash from other investment opportunities, including retirement
Less cash on hand for emergencies
Possible penalties for prepayment from your mortgage provider
Lose if your home value goes down
Keep in mind that while a home is an investment, it is also considered an illiquid asset. This means that there is no guarantee of how quickly you will be able to access the capital later if you need it, as it can take weeks, months or even longer to sell - in addition you do not know if you can sell for a profitable return.
If you are not sure what your best bet is, work with a financial planner to outline your current financial situation and your future financial goals; Then see how a faster mortgage repayment will help or hurt your plans. Note that it is certainly possible to pay a higher or additional fee only occasionally, and that if a few months or years it does not make sense to pay extra you are not obligated to do so.
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Lior Lustig
Has three degrees and over 20 years of experience in the field of technology and real estate.
Owner and manager of a real estate company that provides real estate services in the field of courses, mentoring, financing, transaction analysis and investment.
The operator of the successful real estate and US interest forum on Facebook.
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