The homeowner is an essential factor in an early mortgage payoff. You decide which steps to take, when to take them, and who would guide you as you journey towards a fully-paid property. However, should you really pay off the total amount faster than initially scheduled – or is it better to stick to your current payment plan?
Should You Pay Off Your Mortgage Earlier?
Although there are a few drawbacks to paying your mortgage off right away, the benefits are more significant. Below are a few reasons why you should consider an early mortgage payoff:
Peace of Mind
Unfortunately, a home mortgage is among the top causes of monthly anxiety for many individuals because it takes a massive chunk of your earnings. Want peace of mind? Do away with this huge expense faster.
Freedom from Monthly Payments
When most of your money’s no longer being funneled into a property payment, you get the opportunity to use your resources elsewhere. For example, you can now add to your travel or “passion” jar.
Owning the Home Outright
Full homeownership is the best way to avoid foreclosure – you already own the home, which means you no longer have any financial obligations towards it. So even if you hit a rough patch because of a lack of job security or crippling healthcare expenses, owning your home ensures you have a roof over your head on such stormy days.
Interest Rate Savings
The math is simple on this one: the fewer payments you make, the lower the interest rate you end up paying in total. You could save tens of thousands of dollars, but it’s still advisable to ask your lender whether your payments are going toward your principal and not just on the interest.
How Can You Pay Off Your Mortgage Faster?
Now that you’re leaning towards an early mortgage payoff, you may be wondering where to start. Check out five proven methods and options and assess which of them aligns with your current capacity and goals:
#1 Refinance to a Shorter Term
If you seek the guidance of an experienced mortgage broker, you will gain access to the best refinancing rates. When you refinance your home, the recalculation involved in the process can simultaneously bring the monthly cost down and allow you to shorten your loan term. This significant reduction in the payment period gets you closer to your goal of being mortgage-free.
#2 Add an Extra Mortgage Payment Every Year
One logical way to tackle mortgage payments is to pay more – increase your monthly payments. If your lender doesn’t charge penalties for paying your mortgage early, consider a bi-weekly payment plan. This essentially involves settling half of your mortgage payment every two weeks, resulting in 26 half-payments and 13 full monthly payments annually.
#3 Make a Lump Sum Payment to Reduce Your Balance
A lump-sum payment, also known as mortgage recasting or re-amortization, cuts your monthly payments and loan interest throughout the home loan’s lifespan. Although the interest rate and loan term won’t change, you will benefit from having a relatively lower required monthly payment.
#4 Make Extra Principal Payments
Additional principal payments are intended to decrease the actual mortgage value. How? Your payments do not cover just the interest rate and only a small portion of the principal. The more you cut from the principal amount, the quicker you get to your goal of becoming a full-fledged homeowner. This involves intentional changes in your daily budget management because you need to reallocate financial resources and move your cash around to add to the principal payment.
Pay Off Your Mortgage with the Help of a Top-Ranked Mortgage Broker
When you’re released from your financial commitments earlier than initially expected, you experience a different sense of liberation. A relatively quick mortgage payoff demands much dedication, discipline, and professional guidance, though. You have to become a wise spender and be more strategic in weighing your options as an aspiring mortgage-free homeowner.
It’s a good thing you have access to the best mortgage broker San Diego residents can trust. Paying off your home faster is possible, but only with the detailed and customized plans prepared by a trusted mortgage broker. Every homeowner has a unique set of requirements and capacities, so there’s no one-size-fits-all approach to an early mortgage payment. There is a way and it is available to you when you reach out to the right expert.