As people inch closer towards retirement, owning their home outright can help give a since of financial security. Especially for those that have lived through a financial crisis and/or the recent foreclosure crisis. About two-thirds of the nation’s homeowners are paying on a mortgage while more than 20 million own their homes free and clear. What are some ways you can get closer to making that last mortgage payment?
- Pay more than you owe – You can do this monthly or once a quarter. Paying a few extra dollars a month or making an extra payment each quarter can help you get closer to your goal. When you pay more than you owe, the extra amount goes towards the principal which effectively decreases the amount of interest you will owe over the course of the loan.
- Refinance your mortgage or pretend you did – Obtaining a 15-year fixed rate mortgage will have higher payments than a 30 year fixed rate but you won’t have to pay twice as much. If you are unable to refinance you can act like you did by making payments as if your loan were a 15-year mortgage. This can lead to a lot of interest savings.
- Split up your payments – By taking your regular monthly payment and breaking it up into 2 monthly payments or weekly payments during the month you avoid paying extra interest since interest accumulates daily. If you made biweekly payments on a 30-year mortgage you could end up paying off the loan six years earlier depending on your loan’s terms.