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3 Easy Ways To Pay Off Your Mortgage Earlier If You Cannot Refinance It

Rick Richter

3 Easy Ways To Pay Off Your Mortgage Earlier If You Cannot Refinance It

The economy seems to be improving and with that little fact, the disposable household income seems to be rising as well. A lot of clients ask me what to do – do they refinance into a shorter term or just pay off the loan faster? In this piece, we will talk about the three ways that will shorten your term, pay less interest, all while avoiding the costs of a refinance.

The most obvious example is just paying extra every month. If your payment is $750 a month why not pay $800, with the extra $50 credited towards your principle balance, thus shortening your term and the number of payments you have. You will need to express that you want the credit allocated to principle, and that can be done just by writing on the check stub, or simply calling your mortgage provider and setting that as the standard.

Another great option is to switch your payments from a monthly schedule to a bi-weekly schedule. Bi-weekly payments take advantage of the fact that there are 52 weeks in the year and 12 months. If you pay half your regular mortgage payment every other week, you’ll have made 26 half-payments, or the equivalent of 13 full monthly payments, at year’s end. Just by doing this you will effectively shave off 6 years on a 30-year fixed loan.

The third and arguably most complicated way to benefit is to create a money merge account. In Australia, mortgages are generally set up like home equity lines of credit. They double as a checking account, thus the term “money merge.” When you get paid, you deposit your check into the account, and as you spend money you take it back out again. You hope to put more money in every month than you take out. With a mortgage using the Australian method, interest is calculated daily instead of monthly, and because the money spends as much time as possible in the account before you take it back out to pay bills, you save on interest expense.

I hope this sheds a little light on the options available to you. If you have any further questions, please do not hesitate to drop by my site rickrichter.com.

 

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