The vast majority of home loans nowadays are constructed on a 30-year term. But just because your lender gives you 30 years to repay your mortgage doesn’t mean it must take this long. There are several ways that you can cut the length of time that it takes to pay back the mortgage, thus saving yourself money. The quickest method is to take out a loan with a shorter duration that reduces your overall interest, but another method might work best for you.
Perhaps the quickest way to repay a mortgage will be to procure one with a shorter duration. Mortgage companies offer 15-year notes. In accordance with Good Housekeeping magazine a $150,000, 15-year loan at 5.5 percent interest will increase your monthly payment by $330 a month. But in return, you’ll pay back the loan in 15 decades and possibly save up to $103,000 in interest payments compared to some 30-year note.
Mutual mortgage payments are due monthly. But some mortgage companies permit you to make biweekly payments by splitting the monthly payment in half. Your mortgage company may not provide biweekly payments, but if there’s no terminology on your mortgage paperwork prohibiting additional payments, it’s not a bad idea to put them up yourself. This ’s why. In accordance with Good Housekeeping, a biweekly payment program allows you to make 26 payments in a calendar year, or the equivalent of 13 monthly payments. Good Housekeeping quotes a biweekly plan can help save you six decades ’ worth of mortgage payments and $37,000 in interest.
According to MSN Money, accelerator loans are more popular abroad but are making their way to the U.S., plus they have the potential to shave your interest payments. You create your monthly mortgage payment, but there are two additional measures. First, you deposit your paycheck into an account attached to a mortgage, in most cases a kind of home equity account. Secondly, whatever you don’t spend on living expenses each month is applied to the principal of your mortgage. This is a great strategy for families that don’t invest more than they make each month.
Paying More than the Minimum
As stated earlier, there’s really nothing stopping you from using surplus money for your mortgage, unless it's expressly prohibited by your lender. 1 example comes from Good Housekeeping magazine, which reported that applying just $1 additional per month for your payment would decrease the duration of a $150,000 loan at 6 per cent interest by eight decades and decrease your overall interest payment by about $52,000. In this instance you would start with a $900 mortgage payment and pay $901 the next month, $902 the next month, etc.
Paying Away Other Debt
Odds are your mortgage is put at a lower interest rate compared to your revolving debt. If this ’therefore the scenario, along with your mortgage payments are fixed, 1 tactic is to pay down your other debt, and then use the savings to be applicable to your mortgage payment. The Motley Fool, a financial advice site, recommends several ways to repay debt such as credit card balances and auto loans faster, such as making more than minimum payments and using the “snowball” process. With this technique you apply additional money to one debt till it’s paid, and then proceed to another. The greater payments could save you thousands of dollars that could be applied to your mortgage.