How to Pay Off Your Mortgage Quicker
Any Atlanta mortgage broker can tell you that one of the best investments you can make is paying off your mortgage loan quicker. Mortgages are generally the biggest debt that a person can have. By paying it off early you eliminate that debt and free up money to use for other things. It also means that you are no longer a victim of the ups and downs of the property market. We have some tips to help you pay off your mortgage quicker.
It's all about the principal, which is the amount that you have borrowed. Your interest is calculated based on that principle. Interest and principal are separate on an amortization schedule. This helps you to see how much of your monthly payments are going towards the principal and how much towards interest. By paying extra money towards the principal, you lower the borrowed amount, which lowers the interest.
Normally, you would pay your mortgage once a month. However, if you split that monthly payment into two bi-weekly payments, it can help you get that mortgage paid off quicker. It means you will have paid an extra month for the year. That extra is applied to your mortgage principal, which reduces the amount you will spend on interest, speeding up the repayment process. Check with your Atlanta mortgage lender about making bi-weekly payments and how much you could potentially save.
For those who don't want to deal with the hassle of making bi-weekly payments, you can budget an extra month's payment to send in. By applying the amount to your loan principle you can lower the payment term by around 7 years.
Paying the principal
Another option is to save a bit extra each month an apply that to the principal. This works best for those who are not able to make an extra yearly payment. Whether you round up your monthly payment or add an extra $50 to $100 each month, it will help reduce the term of the mortgage. Just be sure that the extra amount is being applied to the principal. You can check this with your Atlanta mortgage lender.
Recasting is an option where a lump sum of money is paid towards the principal and then the mortgage is recalculated, or re-amortized, based on the new balance. This can reduce the payments while keeping the term time the same. You can then continue making your original payment amount, with the extra being applied to the principal, cutting down the term time of the loan. It's a good option for those who have received a windfall of some kind.
Another option is to refinance your mortgage loan, which can help to eliminate debt. By refinancing you can reduce your interest rate or go for a shorter term on your loan to pay it off faster. If you go for a shorter term your monthly payments may be higher but it will cut your interest costs by 50%.
Flexible mortgage term
If you are taking the refinance route you may want to consider a lender that has flexible term mortgages. This type of mortgage gives you more term time options than your traditional 15 or 30-year mortgages. By choosing a shorter term you will be paying less on interest over time. Speak with your Atlanta mortgage lender to determine how short a term you can manage while still making payments that are comfortable.
While many people tend to stay away from adjustable rate mortgages due to its history, this can be quite a useful option for those who are financially stable. Choosing an adjustable rate mortgage will build up the equity of your home faster, and the lower interest rate frees up more money that you can then put towards the principal of the loan.