Charles H. Miller
As everyone knows, paying off your mortgage faster is beneficial to everyone but banks. If you get out of your debt, they lose their interest and you get your (financial) freedom. It’s not all black and white though, as banks were those that help you get that house in the first place. Nevertheless, you may/should want to “go debt free” as soon as possible, and here are three tactics you could try to accomplish that goal.
1. Pay biweekly, rather than monthly
It may not seem like much of a change, but there is a big advantage in paying half of the payment every other week instead of the full payment every month. With a biweekly schedule, you will actually be making 26 payments (there are 52 weeks in a year), instead of 12. Those payments, of course, will be smaller than regular monthly payments, but overall — you should pay more every year, thus save cash on interest payments.
It is best to setup this sort of a payment plan with your bank so that these biweekly payments will count as your regular (monthly) payments. Many banks will set this up for you for free, although some charge. Or you could setup this payment schedule on your own using online banking.
2. Find an extra cash to pay toward you mortgage, every month
If you could find an extra $100 or $200 every month, during the lifetime of mortgage, this tactic alone could help you save a ton in interest payments. Also, with this approach, you could get out of debt faster — perhaps even years faster.
The easiest way to execute on this tactic is to round up. For instance, if your mortgage is $1,560 per month, you could pay $1,600 (or perhaps $1,700) each month instead. Chances are, you are already rounding up in your head, so why not pay that, slightly bigger sum, instead. Again, you will save a ton in the long run.
The important thing is that you communicate with the bank that the extra money is going toward paying down the principal, and that it’s not being credited to next month’s payment. If that’s not the case, you won’t save on interest that way, though you will still get out of debt faster.
3. Refinance
With today’s low interest rates, now is probably the best time to refinance your mortgage. It is important to crunch the numbers and see whether that extra cash means something to you. Perhaps you want to diversify and put some money into the market, start a new business, support some other business, or take another mortgage. Or you may want to cut down on the number of years it takes to pay off the mortgage
There are multiple options to consider here, and with today’s low interest rates — which are propelled further down by Brexit — you should be able to find something that works for you. You are best off looking at multiple offers and picking the one that works best for you. Visiting banks’ website can be cumbersome, but luckily there are sites like LowRatesShop that allow you to easily compare multiple offers in minutes. The service is secure and free — select your loan type (refinance) and follow the on-screen procedure. Before you know it, you will be presented with not one but a few refinancing options. Check it out.
