Paying even just a little more on your principal each month can shorten the length of your loan. Plug your own loan and interest rates into this mortgage calculator and see how this strategy can benefit you.
The lower the principal gets, the more each payment from then on is applied to the principal as less goes to cover interest expense. Rounding your payments up by even $10 each month could save you several payments each month in the end.
Refinance With Shorter Term
15-year mortgages are the most common, but you can refinance into a mortgage for 10, 15 or 20 years. Your payments will be higher, so you’ll need to make sure you can afford a higher monthly payment. Knowing if you can adjust into the higher monthly payment should help you make sense of whether refinancing is the right method for you.
To get the effect of a shorter term mortgage without actually refinancing or taking the risk, go ahead and make the payments like you had a 10- or 15-year loan. You’re in control this way, but can also back off if you need to.
Should you refinance? Check out this Loan Calculator.
Make Bi Weekly Payments
Most months are more than four weeks. Pay half your mortgage every other week instead of making a full payment each month. At the end of the year you’ll have made 26 half payments or 13 monthly payments.
You may be able to set up this payment plan through your bank and ask them to credit your extra payments toward the principal so you can then save on interest expense.
Money Merge Accounts
If you have a keen understanding of cash management, you may want to further investigate Money Merge Accounts, or the Australian method. In Australia, mortgages are set up like home equity lines of credit, doubling as checking accounts. Whey you get paid, you deposit your check into the account. As you spend money you take it back out. You hope to put more money in than you take out each month. While in the account, the money is accruing interest daily instead of monthly helping you to save on interest expense.
Click here to read the full Money MSN article contributed by Sally Herigstad for Bankrate.com “How to pay off your mortgage early”.
Please contact us to learn more about real estate in Breckenridge and Summit County, Colorado. 800.774.7970 or 970.453.2200. Click here for the latest news about Breckenridge Real Estate. Posted by Breckenridge Associates Real Estate on