Creative Ways to Pay OutYour Mortgage
A mortgage might be the most cost-effective way to obtain money to buy a home, but it comes with its’ own challenges, too. Whether you havea fixed mortgage or a variable mortgage, the goal is to get it paid down as quickly as possible. That’s why finding ways to save money around your home is so important. The more money you save, the more money you can put down on your home, which means you’ll be paying less interest over time. Luckily, there are some creative ways to quickly pay down your mortgage.
Understand your mortgage type and payment frequency
First, it’s important to understand the type of mortgage you hold, and your payment frequency options. This information will help you make strategic decisions to pay down the mortgage faster.
A fixed mortgage –A fixed mortgage means that the mortgage rate you payevery month remains the same during the entire term of your mortgage. The advantage of this type of mortgage is that it offers stability in knowing that whatever happens to interest rates, your payment will never change. The disadvantage of a fixed mortgage is found in the possible premium that you may be paying if there is a large differential between the variable and the fixed rate.
A variable mortgage –This type of mortgage revolves around the fluctuation of the market’s interest rate, commonly referred to as the prime rate. With a variable mortgage, the mortgage payment will fluctuate as interest rates fluctuate. An advantage of a variable mortgage is historically it’s been proven to be less expensive over time. But, the negative of a variable mortgage comes in the form of financial uncertainty if a significant increase in the prime rate occurs.
Payment frequency options
Once you’ve calculated what your mortgage will be, most lenders offer a variety of payment frequencyoptions to choose from. These options include:
- Monthly – One payment 12 times a year
- Semi-monthly – Two payments a month (or 24 payments yearly)
- Bi-weekly – One payment every two weeks (monthly payment multiplied by 12 and divided by 24)
- Accelerated bi-weekly – One payment ever two weeks (your monthly payment divided by 2)
- Weekly – One payment every week (your monthly payment multiplied by 12 and divided by 52)
- Accelerated weekly – One payment every week (but your monthly payment is divided by 4)
You generally choose the payment frequency you want when you first arrange your mortgage,but you may be able to change the frequency of your payments down the road. You should be able to do this without accruing any fees. The more frequently you pay your mortgage, the more quickly you’ll pay it off.
Other ways to quickly pay off your mortgage
In addition to switching to a more frequent payment option, you should constantly be looking for ways to save money around your home and use these savings towards your mortgage. There are a ton of things that you and your family can do to help make this happen:
Rent out unused space–If you have a room above your garage or in your basement, consider renting it out. This will bring additional income into your home that can be used to help pay it off. If you have twenty-something kids living at home, ask them to start paying rent, if they aren’t already.
Do your ownrepairs and landscaping–Hiring professionals to do things around your home can be costly. Do as much yourself as you can (although plumbing and electrical is best left to experts). With YouTube tutorials, virtually any task can be learned, and doingjobs like your own landscaping offers a variety of positive rewards.
Avoid using electricity at peak times –Get in the routine of only running the dishwasher, washer or dryer during non-peak hours. Install smart thermometers and lighting timers, and make a conscience effort to not use as much power during peak hours.
Use tax refunds – Put any and all tax refunds or benefits you receive from the government into paying down your mortgage. If you do this quickly and electronically, you won’t have time to miss this money.
Use any unexpected monies –Any unexpected income, such as a work bonus, inheritance or money from investments could be put into additional mortgage payments. Any money that you weren’t expecting means you won’tleaveyourself short when you make more frequent mortgage payments.
These are just a few ways to find additional savings around your home. With a household budget and examination of your current expenses you may be able to find even more ways to save. Whatever you do save, consider putting it into your mortgage so you can enjoy the benefits of financial freedom sooner.