While the American dream may be to own a home, my dream is to own a home FREE and CLEAR. Although a process and a long term goal, the benefits far outweigh the disadvantages of paying off your mortgage early. Even if you are not making $100,000/yr, any additional money you put toward your principal helps you in the long run. You may not see it initially but trust me… it matters over the life of the loan.
Did you know that less than 20 percent of U.S. homeowners have paid down 50 percent or more of their mortgage? This does not have to be your statistic. By making a few simple changes you will soon be on the road to becoming mortgage-free!
Set Attainable Goals
Decide how fast you want to pay off your mortgage. How soon can you afford to pay it off? Knowing how soon you want to pay it off will allow you to figure out how much money to add to your monthly payment to accomplish that goal. Knowing the additional money needed helps you figure out what expenses you can cut from your life.
Create a Budget
We all know that we need a goal, a plan and deadlines to succeed. I do not know of a successful person who just goes through life “doing.” There is usually always a goal and a list of items/plan to complete in order to accomplish the goal. Once you set the goal of paying off your mortgage in “x” years, we need need to create a budget to achieve the goal. Figure out your monthly income and your monthly expenses. See where you can free up money by reallocating some things. Then, figure out how much more you can add to your monthly mortgage payment. Be sure to write that the extra goes toward your principle or else they will put it toward your interest which defeats the purpose.
Cut the Fat
We all hate when we have to live on the bare necessities but in order to build wealth and pay down your mortgage, sacrifices need to be made. I would much rather make the sacrifice today in not having my daily coffee or show subscription in exchange for paying off my mortgage early. Let’s say I am able to pay off my mortgage in 15 years if I live “broke” on purpose. That means, in 15 years I could buy all the shoes I want with the extra money I’m saving by not having a mortgage. Sacrifice $200-$1000/mo now to essentially earn an extra $2000 for life later?… I’ll take that ALL DAY!
Tax season comes every year without fail. Most of us anticipate a refund check. Most of us also have that money “spent” before we receive it for things such as vacation, new TV, Car down payment… Invest in your future and use that lump sum toward your principle. You will be happy you did sooner than you think. We are a society of immediate gratification, we need to think long term if we ever have a chance at building wealth.
Refinancing gives you the ability to obtain a better interest rate. Even if you have the same interest rate… you could potentially lower your monthly payments by virtue of the fact that you are now redistributing your loan repayment period to 30 years. For example, you purchased at at $200,000 and your mortgage was $1,500. Now you owe $150,000 with a refinance, your payment decreases to $1,100. All you did was refinance. Since you were able to afford $1,500 initially, now you should pay $1,100 with an additional $400 toward your principal. Couple that with any extra money you were able to save due to cutbacks…. your mortgage will be repaid in no time.
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