To enjoy the freedom and power of having your own space – your home –you might need to pay off your mortgage faster. Let’s admit, owing money causes stress, and paying off a mortgage early can bring peace of mind. A paid-off mortgage means more free cash flow from the fixed income, especially if nearing retirement and would want to stop working. It also saves you money on interest, potentially not just hundreds but thousands of dollars.
Paying off your mortgage early has a lot of benefits. Apart from saving extra money for repayment, here are more tips to help you achieve your goal.
Cut back on expenditure.
If you want to pay off your mortgage early, you might need to reduce or totally eliminate vices such as gambling, smoking, and drinking alcohol, if you have one. Also reduce expenditure on subscriptions and other habits that are not helping you with your financial goals. Redirect the money into your home loan instead. Eat out less often, think of ways how to save on energy at home and how to cut back on your transportation expenses, walk or ride the bike whenever possible. If you would log every saving in a journal, you would see that you could save enough amount of money to repay your monthly mortgage in advance.
Make use of Internet banking.
Internet banking offers you the most convenient and fastest way to arrange your finances. Most lenders nowadays accepts payment via online. This is a very efficient way of transaction with less hassle of having to line up to wait for your turn. Online payments also charge lower fees than other modes of payments and you can always make scheduled payments to make sure you pay on time and avoid penalties.
Pay off high-interest debt first.
Before paying off your mortgage early, settle first those high-interest debts like credit card, personal loans, and car loans which usually have have much higher interest rates than your mortgage. It would be wiser to get rid of debts other than mortgage first so you don’t end up behind.
Make extra repayments.
Every time you would earn more than the usual, make extra repayments earlier than the due date. It would mean more time and money saved. If you have started making extra repayments, make it more often to reduce the principal faster. Align your repayments with your income cycle for convenience. Think twice first before lowering your repayments when interest rates fall.
Use an online Mortgage Payoff Goal Calculator.
This online calculator will tell you how much extra you need to add to each monthly payment to pay off your loan in the number of years you specified. Here’s how the calculator works.
First, you have to know your current loan details. Fill in the calculator with the current remaining balance owed, then the annual interest rate and the current monthly payment amount. By providing these details, the calculator will automatically compute your original amortization schedule which includes the current monthly payments remaining and the years remaining to pay for your mortgage.
Then you have to provide your loan payoff goal which must be lower than the remaining number of years to pay your mortgage. For example, you have 12 years more remaining to pay off for your mortgage, so your payoff goal must be 10 years or less. The faster the payoff goal, the better.
When you click calculate, you will get the results showing the total interest savings, additional monthly payment required, and new monthly payment, which is the combination of your current monthly amortization plus the additional monthly payment required based on your goal. What’s so nice about this calculator is that it also shows how much interest you will save from paying off your mortgage early, and that savings is not just a few hundred dollars but thousands of dollars which you can enjoy or put into other investment for your other financial goals such as retirement.
Don’t wait for months or years to pay off your loan because being prompt will potentially save you a lot of money and will make your life a little more stress-free.
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