Mortgages can last for as long as you want them to, did you know that? It’s because you have control over how much money you send into your mortgage lender. By using a few of the strategies below, you can actually pay off your mortgage faster without going through a refinance – that is a viable option as well.
Here are some mortgage accelerator options:
Make Extra Payments
First, find out how your lender accepts extra payments. Can you automate the extra payments separately or should you send it on top of your current payment? Will your lender automatically take the extra off of the principal amount of the loan (which you want), or will they take it off of the interest accrued? Call your mortgage lender to quickly resolve these questions. That alleviates obscurity and ensures your money will work hard to pay your debt off the fastest way possible.
Bi-Weekly Payments
Did you know that many lenders offer bi-weekly payment programs? You would make 26 half-payments using this method, which equals one extra payment per year. If one or more people in your household is paid bi-weekly you bring home an extra paycheck in the months when you make a half-extra mortgage payment anyway, so you wouldn’t miss the money.
Eliminate Your Escrow
If you put less than 20% down on your home purchase, then you have an escrow account and pay PMI. You have an escrow account so your lender is able to charge you enough money throughout the year (divided over your payments) to pay both your mortgage insurance and your property taxes from a special account they hold for you. Now, if you can get rid of your escrow account and instead save these several thousand dollars each year yourself, then your money can earn a little interest for you. Take that interest earned each year and use it to top off one of your payments, just make sure the money you’re not paying to your escrow account is going where it should (and not magically disappearing through the hole in your pocket). 🙂
Show Homeowner’s Insurance
Either you are paying your annual HI premium or each month you’re setting aside money through an escrow account or on your own. If you lower your insurance cost, you’re then able to send in extra money towards your actual principal. Shopping around is always the smartest choice.
Watch Prepayment Penalties
Creditors don’t like you to pay more money up front because it means they’ll make less off of you. Many mortgage lenders will even include prepayment penalty clauses in your mortgage. It’s always smart to read the fine print closely (the benefits of this is a big part of my Home Buyer Boot Camp) and be sure you understand if there are penalties involved and what they mean.
By following these steps you’ll be on the road to paying your debt down faster, which will be great for your credit and your pocket!