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How To Pay Off Your Mortgage Faster
By plrprousers | March 19, 2010
Mortgage loans are designed so that anyone can own a home. The common 30 year payoff is intimidating to most people. There are those that have figured out how to pay the mortgages off faster and shed 5,10 and even 15 years off the life of the loan.
If the mortgage loan was obtained at a high interest rate due to a low credit score and you have since increased your score you might consider refinancing. Anytime the loan can be refinanced with a smaller interest rate it should be done, this saves thousands of dollars in interest but will also reduce your monthly payment. A reduced monthly payment will assist you in being able to afford an early pay off method.
For those who want to benefit from early payoff but do not want to experience a squeeze on their budgets paying a bi-weekly payment instead of a monthly one will work. A bi-weekly payment plan actually pays two additional payments to the loan each year. This can greatly reduce the life of the mortgage loan. Since you have paid nothing more than you are used to the budget remains intact and you feel no ill effects of this method.
The method of coming up with a lump sum each year to place on the loans principle is harder to do for most people. You can find out from your lender what penalties they have for early pay off and make sure if they do penalize that you stay under the limits to avoid them. You can usually pay a lump payment of 15% of the loan at the end of the year after making your regular monthly payments and notice a tremendous difference in the life of the loan.
If you do not have the ability to come up with a large amount of money each year for a one time large overpayment you can pay over each month. You will still need to find out if you will be given any penalties from your lender before deciding the amount. You pay an over-age amount each month with your payment and it will work the same way as the large onetime payment. Your loan will be greatly reduced and it will be much easier to come up with the extra money each month than the one time large sum.
If you are looking for a way to truly reduce the size of the loan and want to see more results than just a mere five years drop off you can combine methods. If you choose the bi-weekly payments then include an additional payment with each. A small amount will show you results so you do not have to go overboard here. The larger the amount the sooner the payoff obviously but even with a modest amount you will see a ten year difference in the lifetime of the loan. If you are lucky enough to have a lender who does not penalize for over payment then you can easily reduce your loan by 15 years or more with over payments. The weeks you have more you can send more and when you don’t have much just send a few dollars over.
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