One Simple Step to Pay Off Your Mortgage
Society has designed the system so that you will be in debt for most of your life â€“ all of it if you plan right.Â The mortgage industry has developed loans that will allow people to borrow more â€“ which have pushed up the price of houses, requiring people to pay more for less house.
It seems like an endless cycle â€“ but you can get out now!
A traditional mortgage will cost you three times what you agreed the house was worth â€“ if you pay off in the full amount of time allotted.Â If you make one extra payment per year, the number of years decreases.Â Now pay on the principle each month, and you could decrease your mortgage term to as little as seven years.Â That means you will be debt free AND you will have paid thousands less in interest.
There are mortgages that are beginning to make their way into the United States that are designed to help you pay off the loan faster.Â Basically, you put money into an account to pay your mortgage.Â At the end of the month, everything that is left over (after paying your monthly payment) is rolled over to principle.Â If you donâ€™t have a mortgage already, this could be the path for you.
If you are already locked into a mortgage, you donâ€™t want to go to the expense of moving to a new lender.Â It is possible to use the same concept â€“ if you will just be disciplined about it.Â Set aside Â¼ of your normally monthly payment.Â At the end of the month, if you havenâ€™t HAD to use the money, then pay it on your principle.
Itâ€™s really just one simple step that will buck the system and have you debt free before your children can even spell the word.
There is an exception to this – if you have other debt from Credit Cards, higher interest student loans, or anything else with a higher rate than your mortgage; pay these first. You often need to call and tell the mortgage company to apply any extra money to the principal otherwise they will either add it to your escrow account (if your insurance and taxes are rolled into your mortgage) or just keep carrying the amount over to the next month – I never have understood how they justify this. So make sure you call before paying extra and make sure you have paid off all of your higher interest debt.
Another good tip is calling credit card companies and asking about offers for balance transfers make sure you find out all of the terms and fees. You can also look for loans with lower interest rates so you can transfer your credit card balances to those. If you do this make sure you cut up all but one emergency card so you don’t get tempted to buy things you can’t pay for outright. DO NOT close the other accounts – your available credit lines positively affect your credit store. For instance owing 3,000 but having 10,000 available is better than owing 2000 and only having 4,000 in credit available. Also make sure you don’t have annual fees, charges for “security” or “credit protection” coverage which the law provides for anyway in most states. Take advantage of 0% offers as long as they last for at least 1 year and don’t change to a high interest rate later or expect you to pay interest retroactively for the 0% period . This often happens with furniture store or electronic store offers.
Stephanie is definitely right – tackle those high interest loans first!
You have to be careful keeping credit open – especially if you have abused it in the past. It is better to have a little lower credit rating because you closed accounts than to have a LOT lower credit rating because you run up your bills and can’t pay.
Like everything in life, there has to be discipline.