Financing the home with a mortgage is usually the plan when purchasing one because it is such a large purchase. The problem with this is it takes 30 years UNLESS you follow these tips to pay off the debt way sooner.
Mortgage debt reduction involves a process that carries on long term; however it doesn’t need to be difficult. As a matter of fact, there are ways to reduce your mortgage quickly resulting in paying off your mortgage debt sooner.
You have the choice of using one or a combination of the tips mentioned below to pay off your mortgage debt sooner:
As a bank calculates your monthly mortgage repayments, they use a calculation known as "amortization." This provides them a specific number to know how much you need to pay each month so that a portion of your payment goes towards paying down the debt and interest charges. However, if you’re paid bi-weekly or even weekly, you can adjust your repayments to the same frequency for which you get paid. This not only helps budgeting much easier to pay a smaller portion each pay period, but it can also cut years off your loan term and save you tens of thousands in interest.
Determine exactly how much your minimum monthly payment will be and then divide that number by two if you’re paid bi-weekly. If you are paid weekly, then divide your monthly payment by four. Write this figure down. It will be your new minimum repayment. You will pay this new amount every time you’re paid.
More than Minimum
Once you have your new bi-weekly minimum repayment worked out, round this figure up to the nearest $5. For instance, if your payment comes to $823.24, then round this figure up to $825.00. This small amount won’t make a big dent from your pocketbook and you will find it easier to remember how much you need to pay.
Rounding up your repayments seems like such a small amount of money, yet through the course of the mortgage it will save you thousands of dollars in interest, eventually paying off your mortgage debt sooner than the 30 year term.
Lump Sum Reductions
Lenders/ banks compute your interest repayments based on the balance you owe at the end of every day. They then add up how much interest has accrued and show you one simple figure at the end of the month. By making more regular payments, such as weekly or bi-weekly payments, and then rounding up those amounts, you will be reducing the amount you owe on a more regular basis.