Having a lovely home is one of the biggest dreams of most families. It is a good goal or ambition. However, paying a mortgage seems like a never-ending burden that almost eats up a considerable portion of a household’s monthly expenses. In the worst-case scenario, when homeowners pay off their mortgage for a long time, the interest rates pile up, and they end up stuck in an endless cycle of paying it off.
Thus, paying off the mortgage as fast as possible is the best way to secure financial freedom. It is easy to say, but paying it monthly considering that there are also other essential expenses to be paid is undeniably challenging to manage. Good thing that there are some ways to settle a mortgage early and with ease. That’s right! It is possible to become a debt-free homeowner with the help of these ways to settle your mortgage early.
Refinance to a Shorter Period
Most people prefer to avail a long-term mortgage over the shorter ones because it is popular and a lighter burden every month, but little did they know it was even more expensive. Let’s say the $ 200,000 mortgage is to be paid monthly within 30 years with a 2.5% interest rate. Then that would be $790 a month. On the other hand, the same mortgage amount must be paid monthly within 15 years with a 2.25% interest rate. Then that would be $1,310 a month. The former is undoubtedly more favorable by looking at the monthly payment alone.
Most people prefer to avail a long-term mortgage over the shorter ones because it is popular and a lighter burden every month, but little did they know it was even more expensive.
However, try to look at the bigger picture. The total interest for the 30-year mortgage amounts to $84,487, and the total payment for the mortgage amounts to $284,487. The 15-year mortgage, on the other hand, has a total interest of $35,830 and a total mortgage of $235,830. Thus, it appears that having a 15-year mortgage saves more money because the interest rates decline as the mortgage period becomes shorter.
Make Extra Payments for Mortgage
Sometimes, the interest rate is why it is difficult to be free from mortgage debt. Thus, to prevent the interest rate from mounting up, another way to pay off a mortgage fast is to allocate extra payments. However, having an extra mortgage payment is a considerable burden when income can’t cater for it. Thus, better find ways for other sources of income to cover up the extra mortgage payment such as freelancing, small business, or best online loans from Vilend.
Extra payments may sound petty because the outcome can’t be seen from only a month or two. However, it can be noticed that it has a significant impact in the long run. Making extra payments helps homeowners cut down mortgage periods which means lower interest payments. The money saved from interest payments can also be used for other purposes like investing.
Having a decent house is one of the biggest dreams of many families. Indeed, a considerable amount of money is set aside solely to buy a house. However, property prices will rise, and the fear of missing out soon comes. Thus, despite the money saved not being enough to pay for the house, having a mortgage entirely seems to be the best resort. There’s nothing wrong with it. Besides, it is an excellent opportunity to recast the mortgage.
Don’t be confused with mortgage refinancing. Mortgage recasting is one of the mortgage features. A homeowner will pay a lump-sum payment towards the principal, and the mortgage will be recalculated based on the outstanding balance. Hence, a homeowner can have the chance to reduce monthly payments, which makes them pay off their mortgage early. Moreover, fees in mortgage recasting are lower compared to refinancing. It is better to refinance for high-interest-rate mortgages, while recasting is best for low-interest rate mortgages.
A mortgage is too expensive, but many opportunities help homeowners save a lot of money and ease the burden of paying loans every paycheck. It is only a matter of knowing the circumstances and applying the appropriate ways to ease the burden of paying off the mortgage.
Thus, never underestimate even a small extra payment because it helps pay off the mortgage early. Above all, the most important thing is to settle the mortgage as soon as possible to save money and peace of mind.