All About Making Extra Payments on Your Mortgage
Real estate purchase has a special meaning for all home buyers. For some of us, it is our most important investment and for others it could be rental income each month.Whatever the reason may be, at the end of the day,home ownership is an important part of a sound financial strategy… until we remember that along with the roof, a 30 year mortgage also hangs over us.
What if there was an easy way to reduce the mortgage period significantly and own your house sooner than you thought? Would you do it? Most homeowners fall under two opposite camps. There is a crowd that would do anything to payback their mortgage and then there is the kind that would make mortgage repayment the last priority because of the convenient low rate of interest. But we at Motivate have done our research and the result might just persuade the latter group of homeowners!
Why Make Extra Payment?
Apart from the very obvious fact that making extra payments every month dramatically cuts down your mortgage period and save interest, you can rest assured that your house would be paid off before retirement. In today’s unstable economy with no definite job stability, paying off your mortgage might offer you a sense of comfort. Moreover, putting your liquid assets in a higher yielding investment plan might end up being a risky move because you would have more money to lose. A mortgage, although has a lower interest rate, is a safer and more fruitful investment and that, by itself, is a big enough reason to pay off your mortgage as soon as possible.
How to Make Extra Payment?
There are several effective ways to do this! Increase your monthly payment by one-twelfths. For example, if you pay $1200 per month towards your mortgage and add an extra $100 every month with your payment exclusively on your principal, you would have made an extra month’s payment! By the end of the year, you would have made an extra month’s payment completely on your principal! Cut the size of a month’s mortgage from your yearly bonus or tax refund and put that towards your mortgage. Finally, and most commonly followed method, make bi-weekly payments every month and by the end of the year, you would have made 26 payments, which equals 13 months! Before you do this, make sure that your mortgage lender or bank does it for free.
How Much Money Can You Save With Extra Payments?
Katie and her husband Jax live in the Atlanta, GA suburb of Kennesaw. The young, recently married couple are first time home buyers with a 30 year fixed mortgage for $400,000 at the interest rate of 3.5%. If Katie and Jax pay $1,796 every month towards their mortgage, they would be able to repay the amount within the 30 years of their mortgage period. But Katie detested the extended period of their debt, she is an emotional person and she wants to do everything in her power to own their home as soon as possible. Jax agrees with his wife but he knows that doubling their monthly mortgage amount would be an impossible task.
They heard from friends and social media that making small extra payments to their mortgage would help them bring their loan period dramatically and couldn’t wait to try it out. Excited, Katie called her mortgage lender to confirm this information and then her bank to increase their payment. By being proactive and involved, they were able to reduce their mortgage repayment amount by a whopping $26,690 and their loan repayment period by 2yrs and 8mos with a payment increase of $100 .
Katie and Jax are just one among the many homeowners who are making extra mortgage payments to own their home faster. For a more personalized payment analysis, log on to https://try.motivatehq.com/early-access/ to understand your mortgage conditions better and to begin your journey towards complete homeownership because at Motivate, we believe that every homeowner deserves useful financial advice that could help you make a well-informed decision about your mortgage repayment. How do we do it? We assess your financial situation and design a smart roadmap that is not only easy on your wallet but in sync with your financial strategy too!