Here’s one relatively painless way to get rid of your mortgage quickly.
When you sign mortgage, you commit to repay a certain amount of money each month during the term of the loan. But that doesn’t mean you have to stick to the monthly payment. Of course, you cannot pay less than your monthly payment – otherwise, you could end up losing your home. But usually you are allowed to pay more than your monthly payment if you want to pay off your mortgage early.
Most mortgages these days have no prepayment penalties. This means that if you can swing it, you can, for example, pay 30 year loan in just 25 years, pumping extra money into a loan on your own.
There are many benefits to paying off your mortgage early. Not only can you drop monthly payments faster and get a more flexible budget, you can also save money on interest over the repayment period. And if your goal is to get out of your mortgage early, here’s one easy way to achieve it.
The Easy Way to Get Rid of Mortgage Debt
Most people make a one-time mortgage payment every month. But if you split your monthly mortgage payment in half and pay every two weeks, you’ll pay for your home earlier without feeling like you’re sacrificing too much.
Let’s say you usually make a monthly mortgage payment of $ 1,000. Using this trick, instead of paying $ 1000 once a month, you will be paying $ 500 every two weeks. But here’s the catch: By making this payment every two weeks, you end up making a $ 500 payment 26 times over the course of the year. That’s $ 13,000 a year in payments. In contrast, if you stuck to your original payment schedule, you would end up paying only $ 12,000 per year.
So how much money could you save by paying your mortgage every two weeks instead of once a month? Let’s say you have a 30-year fixed loan of $ 100,000 with interest rate 3%. If you had stayed in your original payment schedule, you would have to pay about $ 51,777 in interest over the life of the loan. But by paying every two weeks in the way described above, you will spend only $ 44,898 on interest. That’s about $ 6,900 in savings. Plus, by paying every two weeks instead of once a month, you will be exempted from your mortgage several years earlier because you will end up shortening 43 months of your repayment schedule.
Now you don’t have to use the biweekly repayment method to pay off your mortgage ahead of schedule. You can also just randomly add additional payments to your home loan, if you can, to achieve the same goal. But if you know you want to get out of your mortgage ahead of schedule, then paying every two weeks is a good way to stay on track, especially since it’s pretty easy to include in your budget. And that way, you shouldn’t feel obligated to fork out for every contingency amount you get to your lender.
Historic opportunity to potentially save thousands on mortgages
Interest rates will likely not stay at multi-year lows for much longer. That’s why taking action is critical today, whether you’re looking to refinance and cut back on your mortgage payments or are ready to pull the trigger when buying a new home.
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