So, you’re thinking about purchasing a new property, but you’re concerned about the overwhelming world of mortgage rates and property loan fees? We know how you feel! Wouldn’t it be great not to have to worry about those consistent monthly property loan payments? Just think what you could do without that recurring burden arriving in the mail every 30 days––and all the extra money you’d have to play with once your home is paid off? It might seem premature, but paying off your property loans early is not a pipe dream. In fact, it’s a completely achievable milestone. You just need to know how to go about doing it smartly and securely.
Here are some tried and tested industry tips and suggestions for getting that monkey off your back and experiencing financial freedom sooner rather than later:
Refinance and get down to your terms
The most logical (and boring) solution is often the most practical: refinancing your existing property payments. This can make a world of difference, especially if your household is experiencing temporary income insecurity like job loss or if you’ve recently had a major life event like a wedding or added a new family member (and another potential college tuition to cover down the road). Typical property loan durations tend to hover around the 25 to 30-year mark, but there are lenders offering shorter terms––even as low as 10-year loans. While this may slightly increase your monthly payment amounts, the loan’s overall interest will be less. It might not seem feasible at first, but plans are available to ensure that you don’t go beyond your means while saving as much as $50,000 – $75,000 (on a typical 20-year loan) in interest alone. Overall, many homeowners consider refinancing worth it.
Contribute an extra payment each year
Technically, it doesn’t even have to be a true “extra” monthly payment––consider making the switch to bi-weekly property loan payments if your cash flow and income can support it. If you pay half your monthly mortgage payment every other week instead of paying the full amount at the end of each month, you actually end up adding an extra payment each year. It’s math (not everybody’s favorite), but when worked out, it’s an easy and seamless move to make towards early financial freedom––and chances are, you won’t even notice you’re paying extra.
Don’t spend it all in one place! Use some (or all) of your tax refund…
One thing is inevitable: paying taxes. One thing that isn’t always inevitable is receiving a nice chunk of change back from the government in the form of a tax return. When this figure (which you probably didn’t think you’d ever see again) comes back to you, your initial reaction might be to spend it. But think twice! Contributing some or all your tax refund towards your mortgage payments is a surefire way to make serious progress.
…or another lump sum windfall
Don’t just limit yourself to funds from Uncle Sam. If you and/or your spouse get a bonus at work, a large cash inheritance, or even if you’ve downsized your closets and resold your goods online for extra dough, put that “found” money into your property re-payment pool to sooner deliver you from house debt. It’s much easier to part with money you’ve received that you weren’t expecting than the money you really worked hard for––since you didn’t have it before, you probably won’t miss it.
Most of all, do what’s best for you
While it’s hardly fair to call them downsides, occasionally there may be reasons why making faster or larger property loan payments might not be best for your specific situation. One of the biggest factors is age. Some financial experts insist that homeowners place extra money into retirement plans instead of getting ahead of mortgage loans. This all depends on how soon you’ll be needing access to your retirement funds (separate from pensions) and how comfortable you are playing with other investment tools (i.e. stocks and bonds). Also, because many homeowners like to write off their mortgage interest payments as a tax deduction, this means getting some money back each year in the form of a refund. It’s all relative to your unique financial situation––and rules can also change from state to state––so consider talking with a professional before making a move.