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Four Painless Ways to Pay Your Mortgage Off Early

By
Real Estate Agent with Prudential Fox & Roach, Realtors

Are you a retiring baby boomer? If so, you may be a central New Jersey home owner who subscribes to the theory shared by many in that group that you need to pay off your mortgage in order to enjoy a debt-free retirement. In fact, a recent article from the National Association of Realtors® cites www.bankrate.com as saying that “paying off mortgages early is 'in,' and refinancing to take money out is 'out'.” Want to be part of the “in crowd?” Here are four ways to do just that:

Pay a little more: Paying a little more principal lowers the amount of interest paid, and the added amount from then on is applied to principal. In fact, as little as $100 a month extra significantly reduces your interest, and shortens the length of your loan.

Round up: First, read your contract to ensure you won’t pay prepayment penalties. Bumping a $644 payment to $650 on a $200,000, 30-year loan saves you a whopping four payments at the end of the mortgage loan. When you do pay extra, verify that your lender is applying it to the principal (and not just setting it aside for the next payment).

Refinance for a shorter term: You can refinance your mortgage for 10, 15, or 20 years, but 15-year mortgages are the most common. Payments will obviously be higher on a 15-year loan, but not that much higher. Or, get the effect of a shorter-term mortgage without the risk by taking out a 30-year loan and making payments as if you had a 15-year loan.

Make biweekly mortgage payments: Biweekly payments take advantage of the fact there are 52 weeks in a year. Paying half your regular mortgage payment every other week adds up to 26 half-payments, or the equivalent of 13 full monthly payments, by the end of the year. The extra annual payment can chop about six years off a 30-year mortgage. You can ask your bank to credit the extra payments toward principal (so you save more on interest expense), although some banks set aside extra payments until the end of the year.

Of course, you should carefully consider the costs of paying your mortgage off early. Some home owners who’ve come into a few hundred extra dollars per month and are thinking of paying down their mortgages or paying them off early might want to consider putting that money into savings accounts (where it would remain liquid and available) for financial emergencies.

But they should keep in mind that Christmas presents, vacations, and new cars do not constitute “financial emergencies.”

Thinking about paying your mortgage off early? We'd love to talk with you today, and we're where you are! Whether you're buying or selling a home in South Brunswick or Monroe (Middlesex County), Mercer County (Princeton Junction, East Windsor, West Windsor, and Robbinsville), or the Franklin Park or Hillsborough (Somerset County) area, we're prepared to find buyers (if you're selling), or to help you find your dream home. Call The Marchany Team today at (732) 997-0019, and don't forget to “Like” us on Facebook! We are dedicated to helping you in every way possible.

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