Paying Your Home off Faster
We all want to have as little debt as possible. For most of us, a house payment is the where the largest chunk of our income goes. Here are some tips from Homestead to pay off your home faster.
1. Pay More.
OK, OK, this may be stating the obvious, but by paying more, and the earlier you pay in your mortgage term, the greater impact you will have on paying your home off faster. For example, making an extra 2 payments per year on your mortgage, you can take nearly 10 years off the life of a 30 year mortgage.
2. Lowering Your Interest Rate by Refinancing.
For most of us, lower the rate we pay on our mortgage, or all of our debts, results in an improvement to cash flow, which we can allocate to pay down our mortgage.
For example, if we have a mortgage, with an interest rate of 5% and refinance to 4%, because either a change in market interest rates, or an improvement in our credit score, the improved cash flow savings can be used to pay down the mortgage faster.
Or, if we have a mortgage, and credit card debt, we can pay off the credit cards with the new mortgage and use the improved cash flow to pay off the mortgage faster.
3. Refinancing and Lowering your Term
Normally, shorter term mortgages have a lower interest rate than a conventional 30 year mortgage. Refinancing, from a 30 year to a 15 year, you normally can get a lower rate, and the savings are very significant over a 30 year mortgage.
For example, if you finance a $250,000 mortgage over 30 years at 5%, the amount to pay off that mortgage will be $483,139. However, if you take out a 15 year mortgage at 4%, the total pay back on that same mortgage would be $332,859, saving you over $150,000 over the life of the loan!