Instead of being burdened with a thirty year mortgage loan there can be immense satisfaction in paying your mortgage off early, and with careful budgeting it can be done. Some argue against the wisdom of paying off a mortgage loan when the interest rates are relatively low compared to other methods of financing, but until the mortgage is paid in full your house is never truly your home, as the bank has a claim to it.
Anyone planning to purchase a property should look to secure a mortgage over the shortest term they can comfortably repay it. If the payments are manageable over ten or fifteen years then take it in preference to a longer period which will cost far more in overall interest payments. Start the mortgage off with the highest down payment you can afford to thus purchase immediate equity which should in turn prevent you needing to pay the additional expense of mortgage protection insurance.
Always look for the lowest fixed rate you can find, and a mortgage which has no early repayment or prepayment penalties attached. If the best rate is fixed for five years you can amass savings towards reducing the capital when the five year locked in period ends.
Always look for a repayment mortgage over an endowment one which only pays the interest on your loan. You want to see the principal reducing and long term investments to cover the loan in total at the end of your mortgage term have no guarantee they will match the value of the loan. Millions in the UK found that after many years of paying into endowment investment policies which were meant to pay off their mortgage at the end of the term, simply found that the investment had failed to grow enough to pay off their debt.
It is interesting to note that in the UK those who worked within the mortgage industry tended to prefer capital repayment mortgages for their own properties, even if trying to sell endowment mortgages to others.
If you follow these initial steps in starting off your mortgage in the best way then you can budget your income to make direct payments to the lender to reduce the principal of the loan, and thus save thousands more in unnecessary interest payments. Always make your lender aware that extra payments must be allocated to the principal and not considered as advance payments.
Each month when you receive your salary direct some of it immediately into a savings plan. For those who are confident with the stock market it is worthwhile investing in stocks which have a good return and then use the profits to pay towards the mortgage principal. The peer to peer lending schemes also appear as an excellent investment to grow your savings to pay down extra on the principal.
With the goal in mind of paying off your mortgage early you should have the incentive to introduce sensible budgeting into your routine. If you drive a gas guzzler which costs a lot to insure, then trade in your car for a smaller model which will have lower running costs. Pay off all debt such as car loans and then apply the payments you would have made to service the debt, towards the mortgage. Budget by living within your means, and only use credit cards to obtain cash back rewards. Don’t pay for anything on finance apart from your mortgage but save up for your needs.
When it comes to paying off the biggest debt you are ever likely to carry it can be done with judicious budgeting. Simply saving and paying for a vacation in full before you take it represents a huge saving you would have lost by putting a vacation on credit. The saved amount can be used towards the mortgage principle. Whether you choose to save and invest any saved money and make an additional quarterly or bi annual payment will be determined by the likely short turn return you can make. If investing what you save is not for you then pay extra on a monthly basis.
Paying of your mortgage early is actually very achievable if you budget well and understand the benefits of the savings made in interest payments. After all why pay far more than the actual price of your home by handing over huge amounts of interest to the mortgage provider.