SETTLE YOUR MORTGAGE WITHOUT BEING BROKE
Yes, you read that right. There are some ways, at least five, to pay down a mortgage without sacrificing your budget. Let me teach you the ways.
Choose a 15-Year Mortgage
A 15-year mortgage requires a higher monthly payment, but it is well worth the sacrifice. This mortgage charges a lower interest rate, unlike a 30-year mortgage. Also, since the term is way shorter, a homeowner will pay much less total interest over the term of the loan.
Escalate Monthly Payments
Increase your monthly payments and repay your loan more quickly, provided the mortgage does not impose a penalty for early payment. Making additional payments against the principal is a great way to cut your mortgage’s total cost. That way, you will reduce the interest amount and pay off the loan in a shorter time period. You can either pay an extra every month or make an extra payment or two each year. However, the actual interest rate will remain the same. But as you repay the principal, the rate will decline.
If you want to reduce your mortgage and settle it more swiftly, consider refinancing. It enables you to curb interest rate or opt for more favorable terms. But, refinancing is a good option if the savings are higher than the fees. For instance, if it takes you around four or five years to recover the fees to refinance the loan, then this is not a good decision.
Avoid Adjustable Rate Mortgages
Sounds tempting, but this is not always the case. Normally, ARMs offer lower interest rates and monthly payments. But the rate may vary. Instead of saving more money, you may end up paying a higher rate than you first expected. Good thing majority of ARMs have a limit to how high they can adjust. Should you decide to move forward with an ARM, just make sure you know how high or low it can go, and you are comfortable paying within that range. In many instances, a fixed rate is a more feasible choice.
Pay Mortgage Bi-Weekly
Granted you cannot refinance or pay more than the minimum amount monthly, you can split up the payments. How? If you pay half the loan amount every other week, you will have given 26 half payments at the end of each year. That is tantamount to one additional payment annually. By doing so, you will cut the total time you will be paying off your loan, up to many years earlier, say for a 30-year mortgage. Also, the total amount of mortgage will be reduced since the interest rate will be smaller.
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