A mortgage is a valuable lending tool that enables buyers to purchase property and pay back the value of the property over time, with interest. Once your mortgage is repaid, the property title is granted to you: when you repay your mortgage in full, you become the owner of your property!
Of course, there are usually many years of repayment before you receive a release of mortgage and the deed to your property. Repaying your mortgage earlier than later offers a number of benefits, from saving money on interest to increasing your spending and saving wriggle room! While early mortgage payoff has many benefits, it is not for everyone. Be sure to objectively assess your financial situation to see if it’s right for you. Repay your mortgage ahead of schedule by:
Creating Room in Your Budget: If you want to increase the amount you can afford to pay on your mortgage each month, assess your spending budget. Consider if there are places where you overspend, or if there are expenses you could cut out entirely! For example, many of us form a habit of splurge shopping when we want to reward ourselves. While a new shirt every now and then won’t sink you, a repaid mortgage brings far greater joy and comfort in the long run!
Decide When You Pay: Many lenders offer the option of bi-monthly mortgage payments. Bi-monthly payments break your monthly mortgage payment in half. Generally, these payments come out on the first and fifteenth of the month. The benefit of paying bi-monthly? You reduce your principal balance with each payment. As a result, you will repay less interest over the life of your mortgage! A smaller balance owed translates to less time required to fulfill your mortgage debt.
Shorten Your Term: Borrowers with good credit history may have the option of shortening the term of their mortgage. While a thirty-year mortgage gives you more time to repay your debt, you will be paying higher interest over the life of your mortgage. A fifteen-year mortgage, on the other hand, may offer you a lower interest rate. Consult with your lender to determine if you can refinance to a fifteen-year mortgage.
Make an Extra Payment: Many borrowers make an extra payment on their mortgage each year. This is an excellent way to reduce your principal balance and save yourself time and interest down the road!
Boost Your Income: If you are struggling to afford your mortgage payments, consider increasing your earning power. An additional source of income, such as building a business that offers flexibility, has helped thousands of men and women pay back their mortgages early, and on their terms!
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