- Paying off a mortgage loan early can significantly reduce the amount of income you need to survive each month. Imagine losing your job or being temporarily disabled or ill. Without a mortgage payment hanging over your head, you can take your time finding new employment or enjoy a measure of peace while recovering from injury or illness.
- The time frame for paying off a mortgage loan early varies. Some homeowners choose a bi-weekly mortgage, in which they submit half their mortgage payment every two weeks. This method reduces the total interest paid and borrowers are able to pay off a 30-year mortgage in 23 years. Additionally, borrowers can select a shorter mortgage term (15 or 20 years) and pay off their home loan early.
- Paying off a home loan early increases your disposable income. If your mortgage payment is $1,200 per month, eliminating this expense gives you extra money. Use the savings to pay off other debts or start an emergency cash fund. Besides, once you completely own the home, nobody can take it away from you, provided you continue to pay the property taxes. Regardless of what happens to you financially, you'll always have a place to live.
- If you want to pay off your mortgage loan early, but don't want to commit to a bi-weekly mortgage arrangement, increase your monthly mortgage payments by $100 or more. Mortgage lenders apply the extra money to the principle balance. As well, you can submit a few extra mortgage payments throughout the year. Write "principle only" in the memo section of the check. Consistently submitting extra payments can knock a few months or years off your mortgage term.
- If you have a 30-year mortgage term, but you want to pay off the balance early, contact a mortgage lender and inquire about refinancing. You can refinance the home loan and select a shorter term, perhaps a 15- or 20-year term. Of course, a shorter loan term increases the mortgage payment. Still, you'll save money on interest payments, build equity and reduce the mortgage balance sooner.
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