There are several reasons why paying off your mortgage early is a very beneficial thing. Let's go over the reasons for and how to pay off your mortgage early.
Reasons to pay off your mortgage early:
Everyone wants to be debt-free. For one thing, as long as you have debt, there is always a nagging sense of something that needs to get done or impending problems should you be late with a payment or fall on hard times. Secondly, you're paying out money from your paychecks that could be staying in your pocket. The sooner you can pay off your mortgage, the sooner you can see the full financial benefits of your home and hold on to more of your money each month.
Like other debts, your mortgage has interest, meaning the longer it takes you to pay it off, the more money you are spending. It hurts to think the actual cost of your home is only part of your mortgage, the rest is a fee for being allowed to pay the money over so many years. The sooner you pay it off, the less money you will have to spend on the mortgage. This could save you hundreds, thousands, or tens of thousands of dollars, depending on your mortgage and how much you can pay.
HOW TO PAY OFF YOUR MORTGAGER EARLY -- The how-tos
The 1/12th method - calculate how much extra you would need to pay each month to have paid a whole extra month each year. This is a not painful way to pay your mortgage off years early and save big on interest.
Pay any extra - whatever extra you can afford as often as you can afford it, add some money to your mortgage payment. You might designate certain amounts to try for depending on your financial strength at different times. If you get large sums of money at some point, you might apply some or all of them to your mortgage, depending on your other needs and goals.
Make sure the money is going to the principle - sometimes your extra money may be applied to next month's interest rate and not your principle and then it won't help you pay off your mortgage faster.
Get financial advice for larger investments - If you're going to be paying a significant amount extra, get a windfall and want to apply it to your mortgage, or make any other major financial decisions, you might consult a financial advisor to ensure you couldn't make investments that would earn you more money faster than the plan you already have.
Watch out for prepayment penalties - Some companies will penalize you for paying off your mortgage early or paying it too early. Many are okay with it as long as it is kept under a certain amount.
Written by Missy Banks. Missy Banks is a full-time real estate professional who specializes in South Charlotte. Missy is a REALTOR with Allen Tate Real Estate and is one of the company's top producers.Call Missy at 704-968-0547.