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For many people their home is their greatest asset, it’s also their biggest financial commitment, long term financial project, and the largest investment they’ll ever make. It is a worthwhile investment, taking out a mortgage means you have a nice home to live in that you will eventually own. You can decide to sell it or pass it on to future generations.
But most people would be lying if they said it wasn’t a burden at times and they wish they could ditch the mortgage and head for the sun. With a mortgage payoff strategy, like the one in this article, the reality of owning your home sooner and receiving the twin benefits of homeownership and more cash are more of a reality.
How Does the Mortgage Payoff Work?
Anyone who owns a home wants to offload their mortgage as quickly as possible. Paying down your mortgage sooner gives you more security and frees up cash for you that can be used for vacations and home improvements. But is it possible? And if so, how? The mortgage payoff strategy is one option.
The mortgage payoff strategy works by refinancing your mortgage to take advantage of lower interest rates while still keeping up your previous monthly payments. It isn’t cheating, it is simply smart money management that requires some personal discipline to be successful. This system allows you to pardon your mortgage faster.
For example, if you have a home loan of $350,000 on a 30-year loan with a fixed interest rate of 3.98 percent and you change the interest rate to 2.98 percent, you will make a saving of $195 per month which works out at $70,228 over the life of the loan. This extra money can be invested into your principal amount for a faster payoff.
Pay Less Mortgage Interest
What will you do when you retire and finally pay off your mortgage? Will you travel the world, invest in your children, renovate your home, or start a business? The options are plentiful and it would be great to have a little extra money to play with as well.
Refinancing your mortgage with a Full Array of Mortgage Lending Products, and employing an early payoff strategy can also help provide you with extra funds later in life. One other advantage to paying down your mortgage early is that you pay less interest overall on the principal loan. This is down to the fact you don’t pay the loan agreement’s full amount of interest having paid it off early.
Although the interest on the loan remains the same each month regardless of your overpayment, you will in fact be reducing the level of interest you pay significantly over the life of the loan. You could stand to save something like $80,000 or $100,000 on a mortgage of around $350,000. Would you rather have this money after you retire?
Payoff Tricks That Work
The early payoff strategy outlined above is effective, but it isn’t the only one. There are several tricks and practices that can help you pay down your mortgage really and benefit from a faster return on your investment. These ideas include an early payoff strategy and round up payments.
You don’t have to wait for your retirement before you benefit from homeownership and external cash. With the right attitude and financial discipline, there’s no reason why you can’t achieve homeownership status sooner. Firstly, consider paying into your mortgage every month. Make a realistic calculation, how much can you realistically maintain.
The next trick to paying down your mortgage early using financial discipline is to round up your regular payments so you pay extra into the principal sum without noticing. If your regular monthly payment is $350 why not round that up to $400? After you adjust to the new amount it won’t feel like paying more for your home and you will reap the benefits in the long run.
Why Payoff the Mortgage Faster
There are some obvious benefits to paying off your mortgage before the agreed term is finished. You will have homeownership, you will free up extra cash, you can reinvest in the home or elsewhere, you can enjoy the taste of freedom sooner than you expected. However, there is also a downside to this strategy.
While you do receive certain long-term benefits and incentives, in the short term you have to pay more money towards the mortgage each month. This means that for a significant portion of your life your investments are tied up in your home and you have to settle down and play the long game. Nevertheless, a mortgage is a long term investment and it makes more sense to approach it intelligently and pay it off faster.
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