Easy Steps To Reduce That 30 Year Loan


There is no greater feeling than making your last mortgage payment and knowing you no longer will need to work for your home, but can now work for yourself and your family. The feeling of paying off your mortgage is almost indescribable as a home owner and will open a world of investment and savings options to you and your family you might not otherwise have imagined. Remember, debt, no matter the type, steals away your potential at wealth one monthly payment at a time.

The easiest first step to achieving this goal is to begin your “mortgage payment” life by paying your mortgage every other week. For example:

Typical Payment
Biweekly Payment
$1,000.00
$500.00
Annually Paid
Annually Paid
$12,000.00
$13,000.00

By splitting your payment in half you in affect make 1 extra payment per year. However, by paying early using a biweekly payment, you are also reducing the dollars that interest is paid on. This simple process can reduce your 30 year loan to 23 years and can reduce you affective interest rate (the rate of interest you actually pay) by over 1% without refinancing or doing a whole lot of extra planning.

To make an even more significant impact, you can add an additional $100.00 per month. Other ideas for reducing your mortgage terms and affective interest rate:

  • Do you get bonuses from work? Why not apply them to the principle of your mortgage.
  • Do you invest in a retirement account? There are very few investments that will offer the security and return that paying down your mortgage principle will provide! Yes, your CPA will say there is “no tax benefit”, but long term, there is tremendous wealth and security benefits.
  • Every year you file taxes, do you get money back? You will be amazed at the impact a once a year principle reduction of $500.00 or more can make on the cost of your mortgage to you in real dollars.
  • Do you get cash gifts? Why not give a gift to your mortgage principle?
  • Thinking of buying a new car? Why not keep your old car and use the monthly payment you would be paying for a new car to really make an investment in your drive to style! Pay down that mortgage!

When planning to pay your mortgage off early, and reducing your affective interest rate, it is not just the size of the reduction that is important, it is the consistency of doing it that makes the impact. Every dollar is one less you pay interest on. As you reduce your balance, each new payment you make will apply more and more to your principle. It is like the snowball effect you see in the cartoons.

Every payment means one less day you are working for your mortgage and one more day you can start working for your family.

The reality is, the average person can payoff their home in 7 years by simply putting their free money into their mortgage instead of into; new cars, higher car insurance, a new stereo system, new furniture payments, electronic merchandise etc. etc.. Think about all the extra payments you make today, that could be working for you in achieving mortgage free home ownership. Then think about all the luxuries and options that a mortgage free life can REALLY give you without all the hassles. Look at it this way, in 7 years, you’ll be wanting to replace all that out dated furniture, clothing, vehicle, electronics anyway!!!

Pay less now or pay more later. The difference is staggering in the total cost to every home buyer that doesn’t pay down their mortgage.

 

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