Friday, 2 August 2019

How to Pay Off a 15-30 Years Mortgage in 4 Years

Paying off a mortgage early is a goal for many people, so today I want to share how to pay off your mortgage in just 4 years. This is not one of those complicated articles you see online, these are just practical ways to pay off your mortgage early.

Let Get Started

I'm not saying you are going to be paying off a mortgage in 2 - 5 - 7 - 10 years, but I know that these 6 step work and you're going to be able to pay off your mortgage a lot sooner than you think.

1. Buy a Home You Can Afford

When one of my friends was going through the mortgage pre-approval process, the bank told him that he can afford a property up to $250,000, that's how much he could get a loan for. A lot of people will take that number from the bank and then set that as their budget. But that's not what he did, he set is own budget and he was able to set his own budget by reviewing his personal finance and thinking about how much I wanted to spend on housing costs every month. Really it's more than just a mortgage payment, you have to think about taxes, insurance and then repair costs, especially with older homes. After he set his own budget he gave that number to his realtor and they went shopping for homes.

2. Consider a 15-Year Mortgage

Try to get a 15-year loan instead of a 30-year loan. And the reason is the interest rate for 15-year mortgages are lower than 30-year mortgages. That means you're going to be paying less money to the bank over the life of the loan. If you are thinking about this you have to consider that the monthly payments are higher when you have a 15-year mortgage compare to a 30year- mortgage, if you bought a home below budget this may not be too much of a concern for you. My friend's monthly payment was $630 and the interest rate was 3.80% on his $90,000 mortgage. Let's say you end up going with a 30-year loan instead of a 15-year, don't really sweat it, you can still make pre-payments as long as you double-check with your bank, most mortgage providers will allow you to prepay if you have a conventional loan

3. Set A Mortgage Pay Off Date

This is your goal setting, you can check with your budget to see how quickly you could realistically pay off your mortgage, you have your normal mortgage payment but in other to pay off your mortgage rapidly in 2 - 5 - 7 - 10 years, you're going to be throwing a lot more money at the principle. You can also set a short-term goal and long-term goal, those short-term goals will help you keep motivated to continue this process and speaking of motivation you could tell your family, friend, post notes around the house with reminders about your pay off date. You can also track the numbers to see the balance go down and those are all things that will help you stay pumped about paying off your mortgage.

4. Automate Extra Payments

Chances are you already have your mortgage deducted from your checking account automatically on a monthly basis, but what you can do is you can go to your lender's website and you can do the same thing for your extra payment, whether it's $100 a month or $500 a month. Whatever you know that you can do to prepay that mortgage you can set up those recurring transfer between your bank and your lender

5. Increase Incomed And Reduce Expenses

This is the most important step of the process, this is what you can do, but this might not be for everyone. In addition to working your full-time job, you can set a goal to work extra hours a week doing various side hustles and took the money that you earned from those side hustles and applied it towards the mortgage principal balance. If you are a good budgeter, went through your budget categories one by one and look for opportunities to save money, I don't say you should give up everything, you can spend money on the thing that matter to you, ask yourself line by line whether those things mattered to you and the things that didn't just cut it out

6. Reward Your Success

Paying off a mortgage is a big long-term goal, so you can break it up into short-term goals. What you can do is, for every $5000 that you pay off the mortgage, give yourself a $100 and you could use that to spend on whatever you wanted and once you finally eliminate your debt completely, you can celebrate. The biggest reward for paying off a mortgage is the sense of freedom that you got from being completely debt-free. 

No comments:

Post a comment