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Accelerate Your Mortgage Part Two

by Don Current on March 25, 2011

Homes for Sale

photo courtesy Sean Dreilinger

In the last post, I talked about the 20-15-25 rule for taking on a mortgage. These next two tips will help you speed up paying off that mortgage once you have acquired one. They will also help accelerate the process of building equity in your home to ensure you don’t end up under water if the housing market turns.

Pay Early, Pay Often

This tip is so simple, I’m not sure why everyone doesn’t do it. It costs you nothing extra, and it even helps with the budgeting process. All you have to do is pay a portion of your mortgage more frequently. Instead of paying one lump sum on the due date, divide it into smaller payments and spread those payments over the month leading up to the due date.

For instance, let’s say you get paid twice a month, well, why not pay half your mortgage immediately from the first check, and then pay the other half from your next check? What that does is reduce the amount of principal that interest is being calculated on sooner rather than waiting until the last day to pay it all at once. This simple tip will literally cut years off of your mortgage, even a 15 year mortgage. And it costs NOTHING extra.

Trick Yourself

The next tip does require paying a little extra on your mortgage, but depending on your pay schedule, you may be able to fit it into your budget in a way that tricks your mind. If you get paid weekly or every other week, then there are some months where you get an “extra” paycheck.

By arranging your budget around the “normal” months, you can trick yourself into paying extra. For example, if you get paid every other week, there are two months each year where you will get a third paycheck. If you discipline yourself to always make a half payment on your mortgage every time you get paid, you will end up making a full extra payment each year from those two “extra” checks.

When you do this, or any time you make extra payments, make sure you request that it goes entirely toward the principal. This will help reduce the amount of principal that is generating interest and again will speed up the re-payment process.

Reap the Rewards

When you are focusing on paying down your mortgage remember that there are side benefits to having it paid off. It can actually be part of your college planning and retirement planning process. It should NEVER replace those processes though. Always be saving for retirement and for college in addition to paying down your mortgage. But just think about how much more money you would have to put toward tuition if you weren’t making a house payment anymore. Or how much less would you need to live on during retirement if you weren’t paying rent or a mortgage? Get that house paid off as quickly as possible and then enjoy the benefits.

What other tips do you have for getting or paying off mortgages?