Do you have a mortgage that you want to pay off? Do you want to make extra payments so you are not in a 30 year mortgage? If you answer yes to these questions there are some steps you can take to shorten your mortgage. First make sure your mortgage does not have a prepayment penalty as to not cause any unnecessary fees. The first step you can take to shorten your mortgage is to make an extra payment early in the year. By doing this at the beginning of your mortgage a single payment can shave around four years off your mortgage and save you thousands of dollars in interest payments. Also by paying the extra payment early in the year will allow you to use yearend bonuses to make the extra payment. If you make a full extra payment on your mortgage then try paying extra every month or rounding to the next hundred dollar mark. An example is say your mortgage payment is $630 you would make a payment of $700 with the extra $70 reducing your principal. A third payment approach is to see if your mortgage lender will allow you to make payments every two weeks similar to your pay. This will allow you to make one extra payment during the year as there are 26 two week periods in a regular year and the thirteenth payment will be applied towards your principal as well.
A second approach to shortening your mortgage is to see if you can afford to refinance from a 30 year to a 15 year mortgage. Generally your payments will be higher than they were but you will save a lot of money over the 15 years you will not be making mortgage payments. The mistake just about everyone makes when they refinance is they have 20 years remaining on their current mortgage. Now a refinance is generally done when rate go down so you will save money based on the interest rate alone. But remember you have been paying for 10 years and only have 20 years left. The key to this is to refinance into a 15 year mortgage and not another 30 year as that will simply put you back to where you were prior to the refinance. A smart refinance and shorter mortgage terms can save you tens of thousands of dollars over the life of your mortgages.
When getting a mortgage buy what you can afford and not what they approve you for as there is always a difference in the two. Pay extra as often and whenever you can to lower your principal balance faster. And try to always get the shortest mortgage you can afford as well. Use these simple tools and save yourself thousands in interest payments.
