Do you despise debt as much as I do? Do you want to pay off your house early? If so, then I’ve got a helpful method to share with you.
First off, you need to setup your mortgage payments for biweekly payments, rather than monthly. This way you increase the money that goes towards principal. Doing this decreases the length of the loan, because it equals 1 extra payment a year that is applied directly to principal. Instead of making 12 monthly payments a year, it’d equal 13.
The greatest thing about biweekly payments is that you don’t really notice that you’re making the extra payment. You don’t feel the loss of money that goes toward your mortgage, because the payments are more spread out.
To explain biweekly payments more simply, if your mortgage payment is $1,000 a month then your biweekly payments would come to $500. You pay $500 every other week, so $1,000 every four weeks.
Doing this one simple thing can actually take up to 5 years off the length of your loan. So your 30 year mortgage now becomes 25 years, which is awesome!
15 Year Loans
On a side note, some people may argue that 15 year loans are the best way to pay off a mortgage loan; Again, lessened even more if using bi-weekly over monthly payments. I’m definitely open to the idea and even thought about it myself, but in the end I sided with my husband. Who thought that going with a 30 year mortgage loan would be the safest route for our family and leave us with the greatest flexibility. Think job loss, medical emergency, etc.
Anyway … as soon as we received our first mortgage payment we made sure to setup biweekly payments. Taking this step immediately shaved off 5 years and our 30 year mortgage instantly became a 25 year payoff, as long as we stick to our plan.
So how did we set up the biweekly payments, you might ask? We accomplished that by calling our mortgage company and simply asking for it to be set up that way.
Automated Extra Payments
On top of that we were also determined to make extra payments that went toward the principal. This was also part of our method to pay off our home early.
Now concerning the extra payments, we set up a small amount to go toward the principal automatically each month. This is accomplished by simply rounding up our mortgage payment to an even number. For example, if your mortgage is $940 a month you would pay $1,000 and have an extra $60 go directly to principal.
One Time Extra Payments
We also, make large payments once or twice a year when we have extra money to do so.
Your extra payments honestly don’t have to be much. The real benefit(s) actually come from paying as much as you can, as early as you can.
That means, if you have a work bonus that you don’t really need, then putting that balance toward your mortgage principal will help.
And remember if you have an extra $1000 sitting around with no purpose, then you are better off putting it toward principal now rather than waiting till the end of the year. That is assuming you’ve considered whether that money would be of better use somewhere else before you make the payment.
Ultimately, you would be the best judge of whether or not this would be an appropriate move for you. Since, paying off the house early isn’t the number one priority for everyone.
Keep in mind some people might need to add money to savings or their retirement funds. Some individuals might be able to make more on that money in the long run while it sits in the stock market and compounds annually rather than go towards the principal.
If you’ve considered your options and decide you’d rather pay off your home early, then set up those automatic biweekly payments.
Having the house paid off can take a huge burden off your shoulders, so do what you need to do today to pay off your home early. It’s worth the sacrifice(s)!
Leave a comment: Are you determined to pay off your house early? How are you making it possible?
Tawnya is the founder of The Dancing Dollar, a blog about frugality & personal finance. She writes about how frugal living can help other individuals & families live [happily] below their means. She & her husband are on the path to pay off their home in less than half the time. Click here to learn more.