Sunday, 29 April 2012

How to Pay off your Mortgage Early

My husband and I have decided we are going to try and pay off our mortgage before we turn 40. (We are both 28 now) So paying down our mortgage in 12 years, is that possible? We signed up for a 30 mortgage      so can we knock off 18 years off our mortgage? We we are going to do everything in our power to throw money at it in the next few years. During the first few years of a mortgage it is so important to put as much extra money down on the principle as you can. You will save yourself thousands of dollars in interest. For most people, during a 30 year mortgage you are usually spending almost as much as the purchase price of the house just in interest. The bank has to make their money somehow.

To put down as much money as you can on your mortgage you can:

1. Put any lump sums you acquire towards your mortgage. This could be money you win, come in to, get back on your yearly taxes, acquire by selling big ticket items etc. Most lending companies will allow you to make one large payment of up to 30% of the mortgage price once a year.

2. Start by cutting monthly costs and add an extra $25-$50 per mortgage payment. This will add up and will go directly to your principle.

3. Changing your 30 year mortgage to a 15 years mortgage will make your payments more each month but if you can afford it you will be able to pay off your mortgage quicker and reduce your interest by half which in turn will save you thousands of dollars.

4. If you don't already do so, pay bi-weekly instead of only twice per month or even once per month. This will make 2 extra payments per year which would be applied to the principle and help you pay down your mortgage quicker and take years off your mortgage.

5. If your mortgage comes up for renewal, refinance with a lower interest rate. Keep paying the same payments your were making before (or more) thus paying more down on the principle.

Give yourself an overall goal. To pay off your mortgage within a time frame by a certain date. This will give you something to look forward to and work towards. As long as it is reasonable even if you don't pay your mortgage off before the date you set, to be even close to that is an accomplishment in itself. I personally want to pay off my mortgage long before I retire so I can then focus on saving for retirement.  If I can reach my goal of paying off our mortgage before we turn 40 then I will be a happy camper. If I can do it even sooner that would be even better.

I wish everyone good luck in their venture to pay off their mortgage early. With a lot of hard work, a little good luck and determination you will. That financial freedom will set you free and set you up for a great retirement. I challenge everyone to take the test and pay off your mortgage in at least half the time of your original mortgage contract. You will be laughing in the end.

I will keep everyone posted on my own challenge to see if I can pay of my mortgage within 12 years. We are already putting our tax refund down on our mortgage and upping our bi-weekly payments. I will start a tally of how many years down and how much interest saved.

Thanks for listening,