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How to Pay Off Your Mortgage Faster!
The demise of the mortgage industry is the news of the year. Exotic loans, predatory lending practices, high-flying investors buying risky mortgage securities, and the plight of homeowners faced with mounting monthly payments are just a few of the topics making headlines everywhere. But little attention is given to teaching consumers how to pay off their mortgages completely, in a shorter amount of time, so that they are no longer tied to borrowed money and can own their homes free and clear.
 
Buying your own home is a practical realization of the American Dream. We who live in the USA pride ourselves on the value of freedom in our everyday lives, and paying off your mortgage is one of the most liberating goals a homeowner can accomplish. The way to shrink your mortgage is to pay off the principal at an aggressive pace. More and more consumers are making it happen by following disciplined, strategic formulas.
 
The basic premise of any plan to reduce your debt revolves around three steps:
 
1)      Use your monthly statement to find out the breakdown of your mortgage payment. There are two main components. The principal payment shows the portion that you pay each month of your actual original debt. The interest payment represents the fee you pay for borrowing the principal.
 
2)      In the beginning of your loan, monthly payments may be entirely dedicated to interest. As the loan matures, you will gradually pay larger chunks of the principal. Paying off the principal is the key to erasing your debt, and you can voluntarily increase your principal payments to speed up the process.
 
3)      Decide what you can afford. Simply add that to your regular payments and designate it for payment of principal so that your mortgage company will credit your account appropriately. You want to ensure that they don’t use it to pay interest, because applying it to principal instead is more effective and should be your main goal.
 
To accelerate the process of “paying down” your mortgage, apply one or more of the following ideas that help you chip away at the principal at a faster rate:
 
Make an extra payment every year:
 
Make the equivalent of an extra payment each year. One way to do this rather painlessly is to divide your normal payment into twelve parts. Next, add one-twelfth to each payment you make during the year. For example, if your monthly payment is $1,200, divide it by 12 to get $100. Pay an extra $100 each month. After 12 months you will have effectively paid an entire extra monthly payment.
 
By paying an extra $100 a month on a 30-year, $200,000 mortgage at 6 percent interest, you will shorten the life of the mortgage by about 5 or 6 years, saving around $25,000 in interest payments.
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