What is the best strategy to pay off my mortgage early?
Written by Administrator on November 15th, 2010Question by john: What is the best strategy to pay off my mortgage early?
I have a standard 30 year fixed rate mortgage at around 5%. I am planning for an early mortgage payoff. I am wondering if I should pay the minimum mortgage payment and save my extra cash until I can pay the mortgage off in one lump sum 9-10 years from now or make smaller monthly payments.
Best answer:
Answer by Wayne Z
Pay extra principal each month.
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Tags: Answer, Best, Early, Give, lump, Mortgage, principal, Question, smaller, Strategy, wondering
November 16th, 2010 at 12:05 am
Pay more each month. It will reduce you interest payments if you reduce the principle.
November 16th, 2010 at 12:46 am
Definitely pay it now. The earlier you start making extra principal payments, the greater the effect on the loan.
Besides, most savings, CDs. bonds etc. are not paying 5% right now, so saving the money would give you a lower interest rate than what you are paying on the mortgage.
November 16th, 2010 at 12:52 am
Pay extra payments now. Time is what causes interest to accrue.
One trick to make the regular payment 3 days earlier each month.
If it is due on the 10th, pay it on the 7th next month, then the 4th next month.
This creates an extra entire payment going in per year, without increasing your monthly payment amount.
November 16th, 2010 at 1:03 am
If you can earn more than 5% by investing, do it. Otherwise, it’s better to make additional payments to the mortgage now. The interest on a mortgage, like other loans, is compounded. The lower the balance, the lower the interest calculation and the more of the payment that gets applied to the principal. Every extra dollar paid now will be “worth” more than a dollar in the end.
Here’s a great trick I heard. If you get paid every two weeks, pay half the mortgage payment with each paycheck. Not only will this save a little money in interest, but it will also mean an extra payment each year.