How To Pay Mortgage Off Early For Your House

Maybe you have seen the How To Pay Mortgage Off Early For Your House links on popular portals like Yahoo or CNN Money. There is a little “Do you want to pay off your mortgage” link begging you to click on it. If you have surfed the net enough, it’s hard not to click it – curiosity gets the better of you. But there are legitimate ways that you can pay down your mortgage early. Without making extra payments. And yes, your bank would probably prefer you not do it. They lose a ton of interest when you take advantage of these options.

So how can you legitimately do it? Here are two great ways to do it:

Can I Get One Please? One option is to make one extra payment per year. Let’s say your present mortgage is only $1500 per month. If you were to write one extra check for $1500 to your mortgage each year, you can shave off about 7-8 years of your 30-year loan!! That’s not that hard, right? It is the saving that extra $1500 that is the hard part for most people. You can easily just add the extra $1500 to your normal monthly payment, or you can always just walk into the bank too.
Just A Little Please! Another really easy way to achieve the same effect is to add a little bit to your principal each month. When you first get into your home, that payment can seem like a big shock. But over time, you will adjust. Most people get used to that payment within a few months. If you can handle it, it’s a great idea to add a little to the principal payment each month. You will achieve the same idea as adding another payment for a year but doing it slowly over time. Which we all know is a lot easier than a lump sum payment. And, you get the same 7-year early payoff on that mortgage!!
It’s time to go Bi! Call your Bank and set up bi-weekly payments. I know that term may sound complicated, but it is a great way to reduce your principal even faster than 7 years. Here’s how you do it. Call the bank, and get to your mortgage department. Ask to set up a Bi-weekly payment, which will be drawn out of your bank every two weeks. This will also get you to your goal of getting an additional payment per year, while only paying the same amount as is due on your mortgage! It breaks your payment from $1500 down to $750 two times a year. This is a great way to quickly reduce interest owed to the bank. The sooner your payment comes in, the sooner the bank is forced to pay the interest due, thus reducing the time the loan is open for, and reducing your mortgage timeframe. Smart. Smart. When I called my bank (Wells Fargo), half of the people did not know what I was talking about in the mortgage department. I felt like they made it hard to do this. Of course, doing this is not in the best interest of the bank.

"Sooner or later, every homeowner asks the simple question, “Should I pay off my mortgage?” and immediately gets bombarded with a variety of complicated, hedged responses. Here is the simplest possible answer: Yes. If you are anywhere near retirement and can afford to pay off your mortgage, you should." – Wes Moss, Money Matters
Bi Times Two! Now, do you want to pay off your mortgage fast, like in say 15 years as opposed to 30? Here’s a great way to do it with a 30-year loan. Follow the same step as #3, and set up a bi-weekly mortgage payment. Now, use a calculator like this site where you can time how quickly you would like to pay off your mortgage.

There are lots of other benefits to using one of these strategies. It is a great way to reduce mortgage insurance quicker if you have that on your loan. That mortgage insurance is only hurting you, so the quicker you can get that off your loan the better. It’s also a great way of forced savings. In the same way that a mortgage creates equity and wealth over time, adding a payment or paying down your loan quicker forces equity and savings creation in your home.

And guess what? If times are tough, you can always stop the extra payments, right? Right! This is the exact reason why it is always better to do a 30-year loan rather than a 10 or 15-year loan. You have the ultimate flexibility when you set up like this.

Need other great real estate tips? Colin Delaney is a Realtor with GateHouse Properties who loves to help people with real estate questions. Connect with him by phone/text at (714) 743-9882 or email.