Did you know that less than 20 percent of U.S. homeowners have 50 percent equity or more in their homes? After reviewing the terms of your mortgage, it may seem like it will take forever to pay it off. But paying off your mortgage early is not impossible. By making a few simple changes you will soon be on the road to becoming mortgage-free!
#1 Set Attainable Goals
Decide how fast you want pay off your mortgage. Keep in mind that most mortgages are based on a 30-year repayment plan. How soon can you afford to pay it off? Maybe five or 10 years early? Knowing how soon you want to pay it off will allow you to figure out how much money to add to your monthly payment to accomplish that goal.
#2 Create a Detailed Budget
Now that you have set a goal, you can begin planning your budget. Calculate your monthly income against your monthly expenses. If you already have a budget, this is the perfect time to review it. See where you can free up money by reallocating some things. Then, figure out how much more you can add to your monthly mortgage payment.
Everybody hates it, but if you are serious about paying off that mortgage fast, you are going to have to cut back on buying things that you don’t need. Whether it’s your morning coffee or new shoes, there are probably a few things you could cut back on to free up some cash.
#4 Large Payments
Throughout the year many people receive bonuses, tax refunds, settlements, etc. You may want to consider making a large one-time payment from a windfall or bonus. These large chunks will visibly decrease your monthly payments and/or put you ahead of schedule for your loan payoff date.
Refinancing gives you the ability to obtain a better interest rate. If you are approved, refinancing provides you with better alternatives like converting your variable rate mortgage to a fixed rate mortgage.
Ask for Help
Speaking to a professional is very important when you have questions. He or she can inform you of things you may have missed or forgotten in your mortgage agreement, like prepayment penalties. Hidden fees can cause additional costs and need to be included in the total amount owed for your mortgage when you are planning to pay it off fast.