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DONNIE KELLER's Blog

By Donnie Keller | Managing Broker in Fort Worth, TX

4 Tips to Paying Off Your Mortgage Fast

The sooner you pay off your mortgage, the better! Once your mortgage is paid off, you stop accruing debt from interest. And, especially in this economy, debt issomething to avoid. Reata Realty has put together 4 Tips To Pay Off Your Mortgage, FAST!

  1. Instead of making a mortgage payment once a month (12 times a year), make half-month-mortgage payments biweekly (13 times a year). At the end of the year you will have made 13 full payments, versus 12. This extra payment should be applied directly to your principal, which can add up quickly, and help you pay off your mortgage faster.

 

  1. Boost your credit score. If it isn’t already, try to get your credit score up into the high 700s or, even better, into the 800s. If you keep your credit score up, you’ll greatly improve your chances of refinancing and/or lowering your interest rates, which could save you a good amount of money.

 

  1. Round up payments. It doesn’t take a lot of math, or effort, and it could really pay off in the end. You can round up to the nearest 5, 10, 20 or 100, whatever you want. Many people already round a payment like $1,450 up to $1,500, so why not just pay 1500 a month? If you just cut out a couple of coffees a week, it’s pretty easy to save up the money for a slightly bigger payment

 

  1. Refinance into a shorter loan time period. If you did sign for a 30-year loan, consider refinancing into a 15-year loan. You’ll be paying less in interest (although your monthly payments will be higher) and you’ll be able to pay off your mortgage faster. If you can afford higher monthly payments, it is definitely in your best interest to refinance into a shorter loan time period.

Comments

By Rick DeVoss,  Wed Jan 2 2013, 12:17
Wow! There's a whole lot of mis-information given here. Have you ever heard of the principle of leverage? Or the one called OPM? (Using Other People's Money?)

There are a lot of situations where people should not be paying off their mortgage early. First, you have to determine if it will do you any good. It is important to analyze how long you are going to hold a property before you jump into paying off the mortgage. Why should a young couple do that if they intend to sell the house in 5 or 10 years?? The only time it might make any financial sense is if you intend to retire in the home, and how many people know that when they buy it?

With mortgage rates around 4% or less right now, you should have all the home-loan debt you can get. You can easily take your "extra money" and invest it in something that will pay you more than 4% interest! Whole life insurance is a better deal than paying off your mortgae early. Putting all your equity into a homestead property is not a good idea, as it is hard to get it back out unless you sell the house. Maybe the family will need the money in future years. Taking out a home-equity loan is going to cost a higher interest rate, and even then the lender won't give you 20 to 25 % of the value of the property.

You said you were giving 4 tips to pay off your mortage faster, and then listed #2: "Boost Your Credit Score." How does boosting your credit score pay off an existing mortgage faster?? If a person has already qualified for a mortage and bought a house, then their credit score should be good enough, even if they DID want to refinance it. But "refinancing" is expensive, and should only be considered if a person thinks they are going to stay in the house for more than 10 years into the future. The closing costs involved will eat up your equity! One good reason for refinancing is to make the loan payoff period longer, not shorter, as you implied.

15-year notes are crazy for most people. First of all, you'd better plan to stay in the house for more than 15 years, and most young families buying a house don't do that. (According to national statistics.) Why get yourself strapped into making a higher monthly payment? You can do that all by yourself (on a 30-year note) as you attempted to explain in Tip #1. What would happen if you lost your job?? What would happen if one bread-winner gets very sick, or pregnant? ~It might be nice to be able to fall back on a lower monthly payment, instead of having to sell the house.

Tip #3: Be very careful how you send "extra money" to your loan servicer. You want to be sure it is going to pay down principle. Maybe it is better to send a separate check designated "for principle only", because some loan servicers will just put extra funds received into the escrow account, and that doesn't serve your purpose. Check with your lender first.

~Just thought everyone might want to hear another opinion on this subject, before they get all of their funds trapped in an investment vehicle that is not liquid.

Rick DeVoss

ULTRA Real Estate Services

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