So is it important? Let me show you an example of the impact of even small extra payments on your mortgage. For example on a $250,000 mortgage over 30 years at 3.99%, 2 years into the mortgage if you were to start making $100 extra payments alone, you would knock 3.7 years off your mortgage and save $23,468!
So how do make this happen?
One of the easiest ways is to have your Bank or Credit Union deduct a small amount from your pay and have it automatically added to your mortgage or a savings account. This makes it easier than having to remember every time you get paid to make that extra payment. If your mortgage is with another institution, you will likely have to use the Savings account to save it up and then contact them to have the money transferred to the mortgage. Most lenders can take out the extra payment automatically from the account your normal payments come out of.
The other way is to ask the lender to increase your payment amount by $x amount…obviously this is a more permanent solution.
What about Biweekly Payments, or Weekly Payments?
The sooner you make your payment the better. As well, by paying in an accelerated manner, more money is being paid onto the mortgage, reducing your principal and interest costs. For example:
$1,000 x 12 (monthly payments) = $12,000/year
$500 x 26 (biweekly accelerated) = $13,000/year
$250 x 52 (weekly accelerated) = $13,000/year
If you can manage this, it makes a significant impact on your mortgage!
Here we see just changing from Monthly to Biweekly accelerated alone knocks 4.1 years off of a 30 year mortgage!
Please note! Some Bank’s offer weekly & Biweekly payment options which are not accelerated!! This is useless, as it does not reduce your principal any more than Monthly payments…beware!
Other ways to pay down your mortgage faster!
• Use your tax return to pay down your mortgage…this can make a big impact on your mortgage over the long term!
• When you get a pay increase, increase the payment on your mortgage by the same amount.
• If you receive any “extra” payment or gifts, put them on your mortgage asap!
• Instead of gifts or presents on your Birthday, your spouse’s Birthday etc, pay extra down…a free & clear home is a much better gift!
• Check with your lender consistently and ask for a new Amortization Schedule based on your new balance and payments…when you start to see the end date is getting closer (What we call Mortgage Freedom Day!) you will be able to focus on it more.
The other way is to ask the lender to increase your payment amount by $x amount…obviously this is a more permanent solution.
What about Biweekly Payments, or Weekly Payments?
The sooner you make your payment the better. As well, by paying in an accelerated manner, more money is being paid onto the mortgage, reducing your principal and interest costs. For example:
$1,000 x 12 (monthly payments) = $12,000/year
$500 x 26 (biweekly accelerated) = $13,000/year
$250 x 52 (weekly accelerated) = $13,000/year
If you can manage this, it makes a significant impact on your mortgage!
Here we see just changing from Monthly to Biweekly accelerated alone knocks 4.1 years off of a 30 year mortgage!
Please note! Some Bank’s offer weekly & Biweekly payment options which are not accelerated!! This is useless, as it does not reduce your principal any more than Monthly payments…beware!
Other ways to pay down your mortgage faster!
• Use your tax return to pay down your mortgage…this can make a big impact on your mortgage over the long term!
• When you get a pay increase, increase the payment on your mortgage by the same amount.
• If you receive any “extra” payment or gifts, put them on your mortgage asap!
• Instead of gifts or presents on your Birthday, your spouse’s Birthday etc, pay extra down…a free & clear home is a much better gift!
• Check with your lender consistently and ask for a new Amortization Schedule based on your new balance and payments…when you start to see the end date is getting closer (What we call Mortgage Freedom Day!) you will be able to focus on it more.
No comments:
Post a Comment