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new homeThe initial step to paying off your mortgage early is to commit to a long-term financial strategy that will allow you to do so. Once you've made the commitment, the rest is simple. Paying off your mortgage early is not as difficult as most people may think. The primary reason most individuals don't pay off their mortgage early is due to conflicting information presented from many perceived professionals.  As a result, many people don't know what to believe or where to start.

There are a variety of strategies and methods for paying off your mortgage early, but these methods may require you to sacrifice some part of your lifestyle and adjust your spending habits. However, in some cases, you may not have to adjust your lifestyle at all. The primary reason you should consider paying off your mortgage early is the emotional and security aspect of doing so. Once your home is completely paid off, you will have peace of mind.

When investing in the stock market, there is risk involved. For example, the stock market could collapse, and you could potentially lose up to 40% of your investment. However, paying your mortgage off is a risk-free investment. No matter how the stock market fluctuates, your dollar retains its value. Most importantly, it does not affect your mortgage.

Some of the most common ways to pay off your mortgage early include the following:

 

Paying Extra Towards the Principal Every Month

This method will require you to pay extra towards the principal of your mortgage every month. Although this is the simplest strategy, it does require some degree of discipline to have your mortgage paid in full by the time you retire. By making additional payments every month, it will significantly decrease the amount owed over time. It may seem like magic, but the power of compound interest is the driving force that allows you to benefit substantially. Because your mortgage is calculated based on the principal balance, additional payments will reduce the total amount of interest owed.

For example, if your mortgage requires that you pay $600 a month, you will take years off your mortgage by simply paying an additional $100 a month towards the principal. Most lenders don't have a problem with you making additional payments, but it is a good idea to contact them to make sure you can do so. You also want to make sure that the additional amount is not being applied as a prepayment for the following month.

 

Weekly and Bi-weekly Payments

You can pay your mortgage on a weekly basis or a bi-weekly basis. There are more weeks in a year than there are months. Four weeks is usually considered a month. If you choose to pay your mortgage every week, you will end up making an extra payment by the end of the year.

The bi-weekly payment method also produces the same result. There are 26 bi-weekly payments in a year, and by the end of the year, you will have paid an extra mortgage payment. This will allow you to pay off your mortgage seven years earlier than originally anticipated.

To make this process even simpler, some banks offer an electronic method of applying payments towards your mortgage every two weeks. For example, if you are paid every two weeks, you can electronically pay half of your mortgage every time you receive a check from your employer.

 

Mortgage Acceleration Program

A mortgage acceleration program will enable you to pay off your mortgage earlier without altering your lifestyle. You can potentially take 13 years off your existing mortgage and save yourself more than $70,000. A mortgage acceleration program is an alternative approach, but it may leave you with another debt if not done properly. It allows you to use a home equity line of credit to pay down the principal on your first mortgage quicker.

The home equity line of credit is used as a checking account, and withdrawals from that account will be applied towards your first mortgage. This method does not require any changing of lifestyle to pay off your first mortgage. You want to try to pay at minimum 3% more than you normally would each month. If you want to become really aggressive and pay off your mortgage within 10 years, you can make an extra payment every month towards the principal. This will eliminate 15 or more years off your first mortgage.

Prepayments applied to your mortgage offers an excellent return on investment. Whichever strategy you decide to use, it will shorten the life of your mortgage. You will be pleasantly surprised at how much you can save and the speed at which you are able to pay off your home. Once you pay off your mortgage, you will experience an unbelievable amount of satisfaction.

Posted 1:04 AM

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