Paying off your mortgage may sound a little too ambitious, but giving it a serious thought can actually save you a lot of money that you, otherwise, would have to pay in form of interests. It is a very important decision, hence, should be taken considering your overall financial position. Some very important factors that you need to keep in mind are your outstanding debts, tax deductions for mortgage interest, emergency savings, retirement savings, other interest rates and the market value of your house.
Experts at http://www.justbadcredit.co.uk/ say that paying up your housing cost early, frees your money, which can be used up for the other needs of you and your family. You will surely be responsible for paying your property taxes, home maintenance and repairs, home-owners insurance, but, at least, one big headache, i.e., your mortgage payments, will be gone forever. What peace!
But the question is how can you manage to pay off your mortgage? Well, here’s how:
- Try to pay more each month: This is the simplest way to pay off a mortgage. Try to add more to your mortgage payments each month. You need not sacrifice your necessities like medical care. But, you can certainly curtail on some luxury to add that extra sum to your mortgage at the end of a month. This way you can manage to free up your money much sooner rather than later.
If you are not sure exactly how much to save, you can do the following calculation: divide a payment by 12 or multiply the same by 10%, and add that sum to the amount that you pay every month for mortgage. However, ensure that the extra sum is applied to the principal, rather than to the escrow account or interest, because doing so will in no way help you pay off your loan early.
- Make extra payments: Making an extra payment on festival months is more difficult than making extra payments each month. The faster you do away with your debt, the greater cash flow you have; hence, the more things you can do. Having said that, it is also true that making extra payments is painful. However, it can be made a little less painful by paying every fortnight, instead of every month. This leads to 26 half payments instead of 12 full ones. Such a way of mortgage payment can knock off almost 6 years from a 30 year term. Again, in this case too, the extra payments need to be applied to principal.
- Pay a lump sum: An inheritance, a gift of money, an IT bonus, etc., poses chances for you to put in extra money for your mortgage payments. However, this strategy should be applied when you do not have other major payments to make, because you should always pay off your most expensive debt first.
Another strategy that you can adopt is to deposit your windfall into your savings account and set up an automatic monthly deduction from that account towards your mortgage. This way you can have money in your bank and pay off your mortgage at the same time.
There’s another way you can use your lump sum to pay off your mortgage. However, that is a bit aggressive. You can invest the sum for a return that’s higher than the rate of mortgage, then use the plus appreciation, principal, interest and dividends to pay off the mortgage at the time of retirement. Either way, the point lies in figuring out the strategy to do away with the mortgage, because that ‘makes the difference’ between comfortable retirement and not-so-comfortable ones.
Adopt any of these three ways or visit http://www.justbadcredit.co.uk to get a solution for your mortgage payments.
Author’s bio: Henry Pattinson is a well-known financial adviser, working at http://www.justbadcredit.co.uk