Pay Off Your Mortgage Early

Pay Off Your Mortgage Early



Pay Off Your Mortgage Early
It used to​ be that you​ worked hard,​ burned your mortgage and burned the​ papers in​ the​ front yard and partied .​
That doesn't happen too much these days.
Very few people stay in​ their home long enough today to​ pay off a​ 30-year mortgage .​
If you​ can pay it​ off early,​ it​ might be the​ best way to​ spend your money.
There is​ a​ security found in​ owning your own home .​
With every year that passes,​ we count how many years until the​ place is​ free and clear .​
You can make extra payments on​ your mortgage to​ pay it​ off quicker and save thousands of​ dollars in​ interest .​
For example,​ paying one extra payment a​ year on​ a​ $200,​000 mortgage,​ you​ can save over $65,​000.
That's a​ lot of​ money that you​ could spend elsewhere.
There are a​ lot of​ arguments against paying off your mortgage early .​
Long-term mortgage rates are around 7% for most homeowners .​
If you​ deduct the​ interest paid from your taxes,​ the​ actual rate you​ are paying is​ closer to​ 5.1% if​ you​ are in​ the​ 27% bracket .​
Any investments that earn more than 5.1% are a​ better place for your money.
Many advisors recommend that you​ take care of​ three areas of​ investment before using your extra money to​ pay off your mortgage:
Retirement
You may need to​ focus your extra money towards your retirement before you​ pay off your home .​
Owning your own home won't mean a​ thing if​ you​ have to​ sell it​ to​ afford medication and food .​
Saving for retirement should especially be important if​ your mortgage is​ scheduled to​ be paid off before you​ retire anyway.
Insurance
If you​ have others dependant on​ you,​ good insurance coverage is​ necessary .​
Your family's needs should be addressed by you​ policy .​
Make sure that you​ have enough coverage to​ take care of​ your family .​
Disability insurance is​ expensive,​ but a​ good idea .​
If you​ are unable to​ work for a​ long period of​ time,​ it​ takes away a​ lot of​ your worries by providing an​ income.
Emergency fund
Having enough money in​ a​ savings account to​ cover three to​ six months worth of​ expenses,​ including your mortgage payment .​
This will help prepare you​ for any emergencies that might come your way .​
For example,​ if​ you​ break your arm and cannot work for two months,​ your loss of​ income will be covered by your emergency fund .​
On the​ smaller side,​ a​ broken dishwasher or​ vehicle won't stress you​ out as​ much if​ there is​ money designated for repairs.
And don't even think about paying off your mortgage if​ you​ have high-interest debt somewhere else .​
Always pay off your credit cards first .​
Extra money goes to​ the​ loans with the​ highest interest first as​ a​ general rule of​ thumb.
There are some homeowners who really benefit from paying off their mortgages early .​
If you​ have a​ small mortgage and don't deduct your mortgage interest,​ the​ actual cost of​ your mortgage is​ higher .​
Paying off your mortgage is​ a​ good idea.
If you​ are paying private mortgage insurance because you​ owe more than 80% of​ the​ home's value,​ you​ should pay it​ down as​ quickly as​ possible .​
Eliminating your PMI payments will reduce your monthly payments and gives you​ a​ faster return on​ your investment.
Many lenders will encourage the​ payment of​ a​ mortgage early .​
On my first home mortgage,​ our mortgage company offered a​ program that deducted the​ payments from our checking account twice a​ month .​
Each payment was half of​ the​ regular payment .​
Because there are 26 bi-weekly periods a​ year,​ you​ are making an​ extra payment during the​ year .​
If you​ are paid bi-weekly,​ the​ situation can really help you​ in​ your budgeting as​ well.
Programs such as​ these are convenient and free .​
Another way to​ do this is​ to​ take your monthly mortgage payment and divide it​ by twelve .​
Add that amount to​ each payment you​ make,​ and you​ will be making one extra payment each year .​
This will shave years off of​ your mortgage.
Make sure that the​ extra payment amounts are applied to​ the​ principal of​ your mortgage .​
Make sure that your agreement contains no prepayment penalties .​
Most won't.
I am proud of​ you​ if​ you​ are in​ a​ place where you​ can pay off your mortgage early .​
The idea of​ not having a​ mortgage payment is​ a​ wonderful one .​
Look at​ where you​ are,​ where you​ are going and how you​ will get there before you​ decide where your money will be going.




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