How to pay off your mortgage early
Congratulations! You’ve made a big leap in your life. Owning a house became a reality, but the only thing on your mind is the mortgage. But don’t worry! You can pay it off easier and faster by following these tips:
Make an amortization schedule
What is an amortization schedule? It is a spreadsheet with all your mortgage details. Making an amortization schedule shows you the real dimensions of your mortgage, such as how long will it take to pay off, the amount you will have to pay each month, and how much it will actually cost you after adding interest. The amortization schedule is also a useful tool for exploring the real possibilities of paying your mortgage faster.
Reassess your property taxes
If you are like the majority of homeowners, you have an escrow arrangement. This means that a portion of every payment you send to your lender includes money used to pay property taxes. Under such an arrangement, your lender estimates the amount of money you’ll need each year to pay your property taxes, thus adding a sum of money to every monthly payment. This money is deposited into an escrow account. When your taxes are due, your lender will dip into this account to pay them on your behalf.
But you should think about requesting a reassessment of your house with your county tax assessor’s office or tax collector’s office. You may be able to reduce your monthly escrow payment. This will lower your monthly mortgage payment.
Make sure you’re not paying too much for your mortgage
If you’re not careful, your mortgage can become a burden. Make sure you’re not paying too much by asking some key questions. Is it eating up more than 30% of your income? Is your interest rate higher than everyone else’s? Are you having trouble making ends meet? The answers to these questions can be signs that you’re paying too much.
We have talked about some of these in past articles, but it always good to remember:
- Budgeting will always help you. Be thorough with your expenses, know where your money is coming from and going to, then cut back where you can;
- By paying more than the minimum you can free yourself from a good portion of interest and decrease your long term debt;
- Lower interest rates are nice to have, and you can obtain them by refinancing your mortgage. By doing refinancing, you may be able decrease the term of your mortgage and also lower the interest rate. But remember: you will have to pay fees to refinance your mortgage. You can expect to pay about 1.5 percent of the amount you are refinancing in closing costs.
Applying for a mortgage is an essential step in most people’s lives but paying it off shouldn’t be a nightmare. Being financially free is all about organization, commitment and patience, you can settle your debt and enjoy the best life has to offer.