Pay off your mortgage in 2012
Ways to Speed up Your Mortgage Payoff
Have you set up your mind to paying off your mortgage in 2012 or soon after? If so, you will find this information very supportive.
Paying your mortgage more quickly will reduce your housing cost and free up some money for your other needs and wants. Setting oneself free of mortgage is especially welcome if you are near retirement age. However, even with your mortgage payment gone, you’ll continue to be responsible for homeowners insurance, property taxes and home repair and maintenance.
Pay extra each month. This is the simplest way to speed up your repayment process. If you add some extra amount to your monthly payment, from $50 to $500, you may well have an extra payment for the year. To learn the exact amount of your extra contribution, divide the amount of your one payment by 12 and add the result to your monthly payments. The important thing here is to make sure that this extra money is directed to the principal and not to your escrow account or interest.
Make additional payments. Making additional payments every once in a while without sacrificing your necessities also accelerates the loan payoff date. You can set yourself a biweekly payment plan instead of a monthly one and make a payment every two weeks. This way you will have 26 half-payments per year instead of 12 full payments. This method can shrink down a 30-year term with 6 years – again, on condition the extra payment is applied to principal.
Speed up your paying off through refinancing. Refinancing, if it brings lower payment fees, allows for all amounts that you pay extra be applied to the principal. Yet, with declining home values, your home may get lower loan-to-value ratio: getting low appraisal, your loan amount may bring forward a need for mortgage insurance. In this case your refinancing will become absolutely unattractive, with new payment being more costly. If refinancing however works for you, shorten the term of your loan to maximize your benefit. For instance, instead of a 30-loar loan, refinance with a 15-year mortgage, if you’ve already paid off 10 years of your 30-year term.
Downsize your housing costs. As dramatic as it may seem, selling your house as a way to get rid of a mortgage is still pretty effective. It provides a choice to buy a more affordable house or to become a renter (which will set you free of whatever housing debt).
Retirement savings as a last resort. Retirement savings are a great temptation as a means to pay off a mortgage. There is legislation, pending in Congress, that will waive the early withdrawal penalty, if the savings are used to pay a home loan. Even if the legislation is approved by Congress, it is recommended to tap retirement savings only as a means of last resort, like in case you are in danger of foreclosure.
