An Urban Institute report released in 2016 revealed that over 26.9 million people in the US own their homes outright. While some bought them with cash, others continued to pay off their monthly mortgage payments until they were finally done.
According to the report, two-thirds of American homeowners had to take out a mortgage to finance their purchase. If you aren’t one of them, you’ve got nothing to worry about. However, if you are, we’ve prepared this guide on paying off your mortgage early. Take a look.
Can You Pay Off Your Mortgage Early?
Every time you pay extra on your monthly mortgage payment, it is applied to the principal balance. Before you begin to make extra payments, though, here’s what you need to do:
- Consult your lender first. Some lenders may only accept extra mortgage payments at specific times or may even charge prepayment penalties.
- When making an extra payment, make sure to include a note that states that you want it applied to the principal balance, not to the next month’s payment.
Paying Off Your Mortgage Early
With every extra dollar added to your regular payment, you make a dent in your principal balance. Adding even one extra payment each year can take years off your mortgage term.
Here’s how you can do it. To make things easier, let’s say we’re taking a $220,000 mortgage loan over a 30-year term, with a 4 percent interest rate.
An Extra Payment Each Quarter
Doing so will knock 11 years off your mortgage term, saving you over $65,000 in interest.
Take Lunch to Work
This may seem like a bizarre point, but apart from the health benefits of eating homecooked meals, you’ll be saving more money that you can put toward your monthly mortgage payment. Adding about $100 to the monthly mortgage payment that you would have otherwise used for lunch money will have you saving over $28,000 in interest.
Refinance Your Loan (Or Pretend You Did)
Refinance your 30-year loan into a shorter 15-year loan. Paying off a 30-year loan involves far more interest than a 15-year one. If, on the other hand, your interest rates are low, you could save on the closing costs of a 15-year loan and pay off your 30-year loan as if it’s a 15-year one.
If you’re looking for tried-and-tested solutions to pay off your mortgage in Texas, the experts at Recovering All Investments, Inc can help. We offer professional mortgage assistance programs, foreclosure assistance programs, and credit repair programs.
Get in touch with us today for more details on our services.