The Only Real Ways To Pay Off a Mortgage Early

The day you move into your new house is always a happy one. Everything is great and you now have your own abode. The feeling just couldn't be better. Then, an inevitable thought crosses your mind. You have 30 years left to pay on your mortgage. Wow! Thirty long years of making monthly payments, now there's a reality check!

No one likes to be saddled with a long-term debt such as a 30-year mortgage. Because of this many ways have been thought up where people can pay off their mortgages well ahead of schedule.

These methods sometimes promise you'll be paid off in 7 years, some 10 years, 15 years and some incredibly promise you will pay off your mortgage 26 years ahead of schedule. I'm sorry, but now I must hit you with sobering thought number 2: there are only two ways to pay off your mortgage early!

By the end of this article you will find out what these two ways are, but first let's talk about some of the not so real ways.

Accelerator mortgage

With an accelerator mortgage, you pay every cent you make into a mortgage account and at the end of the month your mortgage payment is taken out of the account. Proponents of the accelerator mortgage say it works because this account you pay into pays interest and that compounding interest negates the interest you are paying on the mortgage.

However, when the agent sets up your accelerator account, he/she asks you how much you want to leave in your savings each month to be paid toward the mortgage. You will even be egged on. They will ask, "$250, $500, $1,000?" $1,000! Heck, if you paid that much toward your mortgage each month, you would pay off any mortgage way ahead of schedule!

If you were to say, "well, nothing. I don't have anything left after groceries and other expenses." They won't want to give you the mortgage because the compounding interest in this mortgage account means very, very little. The heart of the accelerator plan is you pay extra principal in the way of savings left in your account each month.

Biweekly, Bimonthly and Weekly Plans

With the biweekly plan you are led to believe making two payments a month, which together equal the same amount you have been, paying monthly, will take 7 years off the time it takes to pay off the mortgage.

In reality, with a biweekly plan you make 26 half payments or 13 monthly payments each year instead of 12 so, of course, you will pay off your mortgage a lot sooner. The backbone of this plan is you are led to believe you will not be paying more money each month, but the fact there is more than 4 weeks in a month is the real reason it works. Oh, and by the way, for getting fooled like this you get the pleasure of paying about $1,000 upfront in fees to convert to the biweekly plan!

There is no such thing as a bimonthly plan. It is just a Biweekly plan improperly titled. Weekly plans are the same as biweekly plans cut up into smaller payments, but the same arithmetic applies.

The only two ways

The conclusion is there are only two ways to pay off a mortgage ahead of time. One is to pay more principal each month. For instance, the payment on a 30-year mortgage for $200,000 at 6.25% is $1,231. However, if you pay an extra $270 each month, you will pay off the mortgage in full, 11 years ahead of schedule and you will save over $100,000!

The only other option you may be able to get that will help you pay your mortgage earlier is to get a lower interest rate and continue to make the same monthly payment. In the example above, if you were able to refinance at 5.50% but you continued to pay $1,231 monthly, you would have that mortgage paid in full in 25 years, instead of 30 years.

Still, paying $1,231 monthly is the same as making additional payments toward principal because the scheduled monthly payment for $200,000 at 5.50% is $1,135. So, here is the final conclusion; you can try to fool math, but it is just as futile as trying to fool Mother Nature. You can't do it! To get your mortgage paid ahead of time, you have to make principal payments ahead of time one way or another. That is all there is to it!

How to Pay Off a Mortgage Fast

Probably the longest commitment we ever make in our lifetimes is the 30 years we commit to a mortgage. There isn't too much we can count on having after 30 years, but unless we sell our houses or hit the lottery, we can be sure we will be paying off our mortgages for a long time!

Imagine how nice it would be to be mortgage free! It would, in many cases be like getting a $1,800 a month raise. It doesn't seem possible anyone would have any kind of financial difficulty if he didn't have a mortgage hanging around his neck. You could buy just about anything and go just about anywhere without needing to prepare your budget around that monthly mortgage payment.

In this article, we will explain how to pay off your mortgage in double, triple and even faster time! Oh, it won't necessarily be easy, but it can be done. It has been said a person can do anything with motivation and a plan. So, here's the plan.

Check your interest rate

If you are paying over the market rate on interest it may behoove you to refinance to the lowest rate you can get. Here's why:

A $250,000 mortgage at 8% for 30 years comes with a monthly payment due of $1,834.41. Looking at an amortization schedule for this mortgage we find on the first payment, the principal being paid is $167.74.

A $250,000 mortgage at 6% for 30 years comes with a monthly payment of $1.498.88. Its amortization schedule shows the first payment's principal portion is $248.88. Why is this important? Because you want to pay off as much principal as possible while paying as little interest as possible.

The early months are the most important ones

With the 8% mortgage, as we have noted the first monthly principal payment is $167.74. The principal portion of the payment increases slightly with each payment. So, for payment number 6, the principal paid is $173.41. If we add the principal payments for payments 2 through 6 together we get $855.64, and if we add this amount to our first payment, we will have paid the first 6 payments of our mortgage.

If we keep adding $850 to $1,000 to our payment every month for the next 6 months, we would have paid off the first 6 years already!

As you can see, the early months are important in getting a good start to paying off a mortgage early. This is because in these months, the interest, which is time value, is expensive. So, by not using that time we save a lot of money.

Double time and then some

Now let's see what would happen if we doubled the payment every month. The payment due monthly is $1,843.41. If we paid $3,646.81 monthly, we would be paid in full in 7 years and 7 months. Now that's quick!

Here's why it's important to get as low an interest rate as you can. If you had a 6% interest rate on the same amount for 30 years, the monthly payment would be $1,498.88. With this loan, if we paid a total of $3,646.81 monthly, we would be paid in full in exactly 7 years. So, we would save an extra 7 times $1,498.88 or $10,492.16.

Who's got that kind of money?

Of course, coming up with an extra $2,000 a month is a bit much, but this is the kind of money it takes to pay off a mortgage in a lightning quick mode. So, to get a more realistic goal, here's what to do.

Look at the mortgage's amortization table and scan down to the halfway point. This would be payment number 180 on a 30-year mortgage. Take note of the principal portion of this payment.

Profiting from Selling Your Real Estate - Inexpensive Improvements that Pay Off

Selling your home is always stressful, especially when you realize that you may have to invest some money in your house to get the most out of selling it. Real estate specialists will tell you, however, that you can often improve your profits with some simple, inexpensive steps that are relatively low cost. Neatness is one of the most important things prospective buyers notice when looking at property, so be sure everything is tidy, from the yard to the garage. This means keeping weeds pulled, the lawn mowed and toys tucked out of site. Your garage should also be thoroughly cleaned, with tools stored properly and dirt swept away.

If you don't usually have a green thumb, invest in some new outdoor plants that you can put around the entrance to give an inviting feel. If you don't have a garden area, put out potted flowering plants to add a touch of color. The first impression is a lasting one, so put a fresh coat of paint or stain on the front door and hang a seasonal wreath or add an attractive door knocker. Be sure you've had the house's trim painted recently (or do it yourself) and clean out all gutters and downspouts.

Indoor repairs are also very important - especially ones that may not be urgent, but would strike potential buyers as annoyances they don't want to take care of as soon as they move in. Dripping faucets, creaking door hinges and chipped trim are all features that will jump out if you don't take care of them, and none of them will cost more than a few hours and a few dollars to repair. A real estate sale is often lost or won on such details.

Cosmetic changes that can really improve the value of your home for relatively small cash are always a good idea. One of the best returns on your money comes from painting. Sure, some buyers may repaint when they move in anyway, but fresh, clean walls in light neutral colors brighten the rooms and make the whole house seem fresher and cleaner. Adding crown molding to key rooms such as the living room and dining room also adds real personality and richness to a room for very little cost. Simply purchase pre-cut molding and nail-gun into place, then paint in a contrasting shade from the walls (matching it to the window trim) to make the room really stand out.

Consider switching out fixtures in the kitchen and bathroom if yours are dated or pitted with age. You can find great looking, stylish fixtures in a variety of finishes on sale at large home improvement stores throughout the year. The right fixtures can change the whole look of a bathroom or kitchen.

If you have carpeting, have it cleaned by a professional or, if it's in really bad shape consider replacing it. Although this is a bit pricey, you can find excellent deals on remnants for smaller rooms with a bit of shopping around. Hardwood and tile floors should be thoroughly cleaned and buffed or polished so that they shine. Scuffs and a dulled finish hint that you haven't taken proper care, and may put buyers off.

A lot of people forget about cleaning their windows before showing their house. It may be a chore to do, but it's worth the time and effort - sparkling glass makes even older windows seem newer, and makes the house seem clean and bright. The same goes for cleaning light fixtures thoroughly - take them down and polish all of the pieces and make sure that you replace any burnt-out bulbs. Other areas to clean that can be easily overlooked include the air returns and any vents for heating or air conditioning, which should be vacuumed thoroughly. Home buyers will want to take a look at the furnace, hot water heater and air conditioning unit. Take a look at yours - are they covered in dirt and surrounded by clutter? If they are, clear the area and clean everything completely so that the impression is one of clean, efficient appliances.

Finally, when you are ready to show your home, set the stage. Put out fresh flowers in the family room, place a bowl of fresh fruit on the kitchen table and make sure all of the rooms are brightly lit. A house that looks appealing and comfortable to potential buyers will sell much quicker than real estate that looks sterile and empty - make it look like a home, not a hotel room. If you keep these simple steps in mind, you'll soon sell your real estate for top dollar.