Ways To Shave Off Your Mortgage Payment

Ways To Shave Years Off Your Mortgage Payments

Here are some tips for you to help you save and take some years off your mortgage payments. 

Set A Deadline for When You Want to Have Your Mortgage Paid Off

Setting a goal or time frame of when you want your mortgage paid off can help you prioritize and help you efficiently organize a system to help you pay off your mortgage. Whether it is 15-20 years, Richard Whitman vice president of Texas Trust Credit Union suggest that homeowners pinpoint when they want there mortgage paid off, and then calculate how much extra money they’ll need to pay a month in order to reach that goal.  

For example if a homeowner has a $150,000 mortgage with a 30 year fixed-rate term and an interest rate of 5%, the monthly payment would be $805.23 a month. 

The homeowner would be able to pay off the mortgage a decade sooner, while also being able to witness all of the savings in interest by employing this strategy. 

Use The “Dollar” A Month Strategy 

If you are on a tight budget but you want to pay off your mortgage a lot faster, then the one-dollar plan may be beneficial for you. By simply contributing one extra dollar to your principal each month it can make a big difference in shortening your loan term. 

According to Nationwide Bank: 

If you got a $150,000 30-year fixed rate loan with an interest rate of 6%, you’ll be making $900 monthly payments. But by adding a single dollar to your payment each month $901, then the next month $902, then $903 and so on for the entire span of your loan, then you’ll pay it off 8 years faster. 

Refinance to a 20-Year Fixed Rate:

Securing a 20-year fixed-rate mortgage can help you cut down the length in your mortgage. Barry Habit, chief market strategy officer at Residential Finance shows the following numbers for a $200, 000 loan:

Following the numbers from this example by securing a 20-year fixed rate you would be paying an additional $232 per month (by weekly $58). That’s a small price to pay to own your home free and clear a decade sooner, and save more than $65,000 in interest.  

Refinance to a Lower Rate, but Maintain the Same Monthly Payment Amount

With current rates on the rise, being able to refinance to a lower interest rate would be ideal. But also note that maintaining your old monthly payments prior to the refinance may be beneficial. 

Here is an example created by Senior Loan officer at PFS funding and writer at The Mortgage Insider, notes that this is a great way for you to use refinancing as a tool to pay off your mortgage quickly. Here he is using the example of a homeowner with a 30 year fixed rate mortgage of $300,000 who then refinances to change his rate from 6% to 4.17% the average on June 27, 2013

But if you continue to pay the $1,798 payment on your refinance loan you would be able to pay off your loan by July 2034. Using this strategy, the homeowner could actually pay off his house in nine years and two months faster.

For further questions or more information please call us today (808) 426-7661.