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Ways to Become Mortgage-Free Faster

A recent article “Paying Down Your Mortgage: How to Do it the Right Way,” Zillow (Aug. 15, 2012), mentioned two ways for paying down your mortgage.
For many of our parents, and for generations before them, being mortgage free was the ultimate goal as ‘Mom and Dad’ stayed in the same home their entire lives, and well past the typical 30 year mortgage.  Yes, I think all of us dream of having no mortgage payment, but I don’t think today’s buyers dream of staying in the same home for 30+ years.
Even if you don’t stay in the same home happily ever-after, there are three steps you can take to remove your mortgage payment faster.
  1. Get a 15 year mortgage instead of a 30 year:  Yes, this is an option, but it isn’t one that I recommend.  Why?  Because if you secure a 15 year mortgage, you must be able to handle the higher payments each and every month.  Our economy doesn’t need any more foreclosures because you couldn’t keep up with the higher payment after losing your job and having three more kids.  If you go this route, be sure you can handle the payment from now on.  That was slightly sarcastic, because none of us can control the future.  Instead of getting a 15 year mortgage, you can use the following steps to eliminate your 30 year mortgage in about the same time.
  2. Arrange a bi-weekly mortgage payment structure: These bi-weekly payment structures are usually conducted by a third party outside of your mortgage holder.  This concept is simple.  Pay the mortgage partially, even every two weeks, instead of all at once at the end of the month.  By doing so, you benefit in two ways: (1) less interest accrues on your loan and (2) you actually end up making one extra payment per year.   A payment every other week actually secures 26 ‘half’ payment, or 13 months of payments insted of only 12 each year.  This extra payment a year can actually drop your 30 year mortgage to a 22 year mortgage.  Not bad.
  3. Make an extra principal payments: Kind of sounds redundant, but it is different.  Continue with your biweekly payments, but then make ‘extra’ payments when you can to trim down your principal balance on your mortgage.  You can make one big extra payment at the end of the year, make bigger payments each month, or just pay extra when you get a bonus check, or a little padding in your bank account.  All of these reduce the interest burden on your mortgage and will pay the principal down faster.
By: on September 7th, 2012 Category: Real Estate News Tags: , , ,